Clarification on disclosure of directors’ remuneration

The FRC has provided clarification relating to the disclosure of directors’ remuneration by small entities applying FRS102 section 1A effective from 1 January 2026.

The amendment aims to improve clarity and seeks to reduce the level of judgement involved.

So what are the changes?

Prior to the FRCs review in 2024, small entities applying FRS 102 section 1A were only required to disclose “material” related party transactions if they were not conducted under normal market conditions.

The amendment now requires the disclosure of related party transactions in line with paragraphs 33.9 and 33.14 but excludes paragraph 33.7 (which relates to the disclosure of key management personnel compensation).  FRS 102 does not explicitly require UK small entities to disclose directors’ remuneration.  However:

1.    Where directors’ remuneration is not concluded under normal market conditions, disclosure is required by law (paragraph 66 of Schedule 1 to The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 (SI 2008/409)).

2.    Section 393 of the Companies Act 2006 requires company financial statements to give a true and fair view. To meet this obligation, a small entity may need to include disclosures beyond those explicitly required by FRS 102. This could extend to directors’ remuneration where judgement may be required.

3.    Transactions with directors that do not fall under the definition of key management personnel compensation (and therefore outside the scope of paragraph 33.7) are expected to require disclosure under paragraph 33.9.