In this article, which forms part of our wider series on the upcoming changes to FRS 102, we turn our attention to an area that has received far less coverage than leases or revenue recognition – the updated disclosure requirements for small entities applying Section 1A.
As with our earlier articles (“You know it’s changing, but why does it matter?” and “Lease accounting – commercial implications and practical challenges”), we’re not going to dissect every paragraph of the standard. Instead, the focus here is on what this means commercially – and where small entities may face practical challenges as reporting expectations increase.
While much of the focus has understandably been on the major accounting changes (particularly leasing), the updated Section 1A disclosure requirements are just as important. For accounting periods beginning on or after 1 January 2026, small entities will need to provide additional information to ensure their financial statements continue to give a true and fair view.
Although these changes may appear modest at first glance, the implications are far reaching – particularly for entities that have relied on the reduced disclosure framework to keep published information to a minimum.
What’s changing – and why it matters
Section 1A has always required the disclosures necessary to give a true and fair view. The updated standard now sets out more explicit requirements, clarifying what “true and fair” means in practice.
The key additions include mandatory disclosures relating to:
- Going concern
- Provisions and contingencies
- Share-based payment transactions
- Current and deferred tax
- Dividends declared and paid or payable
- Leasing arrangements (qualitative and quantitative), including short-term and low-value leases
- Performance obligations in customer contracts
For many small entities, this will be the first time structured disclosures are required in these areas. In other words, Section 1A does not remove the need to consider the wider changes – it brings them into sharper focus.
A significant shift: related party disclosures
One of the most notable – and commercially sensitive – changes relates to related party transactions.
Under the current Section 1A, small entities are not required to disclose related party transactions conducted on normal market terms. The updated standard removes that exemption entirely.
This means:
- All related party transactions must be disclosed, even if they are at arm’s length.
- Small entities will effectively be aligned with those applying full FRS 102 in this area.
- Financial statements may reveal more information about director relationships, shareholder loans, group transactions and other arrangements that have previously remained outside the public domain.
For many organisations, this is likely to be one of the most impactful elements of the update, with implications beyond technical accounting – including stakeholder communication, banking relationships and expectations around privacy.
ECCTA reforms – and the delay to mandatory full accounts filing
Alongside the FRS 102 amendments, many small entities have been preparing for wider reforms under the Economic Crime and Corporate Transparency Act (ECCTA), including the proposed requirement to file full accounts (including the profit and loss account and directors’ report) at Companies House.
The original implementation date of April 2027 has now been cancelled. Companies House has confirmed:
“Changes to accounts filing will not be introduced in April 2027. The reforms are still under review, and companies will receive at least 21 months’ notice before any new requirements are brought in.”
In practical terms, this means the previously expected timeline has been pushed back, and there is currently no confirmed replacement date.
For now, it is business as usual. However, the broader direction of travel remains clear: greater transparency and a reduced ability to keep financial information private.
Where should small entities start?
As with the leasing changes, early preparation will make a material difference to the year-end process.
We recommend:
- Reviewing existing disclosures to identify gaps relative to the updated Section 1A requirements.
- Mapping related party relationships and transactions early in the year.
- Understanding how these disclosures interact with the wider FRS 102 amendments, particularly leases and revenue.
- Monitoring ECCTA developments closely, given the newly announced delay.
- Engaging with advisers and auditors to clarify expectations well ahead of transition.
The intention behind the updated requirements is greater transparency and consistency in small entity reporting. But in practice, this will require a more structured and proactive approach than many entities have previously needed.
If you would like to discuss how the updated Section 1A requirements apply to your organisation, or would like support preparing for the transition, please get in touch with your usual UNW contact or email enquiries@unw.co.uk
*(Updated for ECCTA Filing Reform Delay)
