UK GAAP: Accounting Standards and Compliance

Learn what UK GAAP is, its core principles, key reporting standards, and how UK companies can ensure compliance or choose IFRS.

UK GAAP—short for Generally Accepted Accounting Practice in the UK—is the framework that governs how financial accounts should be prepared and presented for most UK companies. It ensures consistency, transparency, and reliability in financial reporting.

UK GAAP has evolved over the years and is currently based on a suite of standards issued by the Financial Reporting Council (FRC). These are tailored for businesses of different sizes and sectors, providing a structure for measuring financial performance and financial position.

What Is UK GAAP?

UK GAAP refers to the body of accounting standards and principles used in the United Kingdom to prepare statutory financial statements. It includes formal FRC standards and guidance as well as accounting conventions and company law requirements.

Since 2015, UK GAAP has been largely replaced by a streamlined set of FRC-issued standards, mainly:

  • FRS 102 – The standard for medium and large companies

  • FRS 105 – A simplified version for micro-entities

  • FRS 101 – For subsidiaries using IFRS with UK adaptations

UK GAAP provides flexibility for companies that do not wish or need to apply International Financial Reporting Standards (IFRS), which are required only in specific situations.

What Are the Key Principles of UK GAAP?

The core aim of UK GAAP is to ensure that financial statements:

  • Give a true and fair view of the company’s financial affairs

  • Are consistent from one period to the next

  • Are comparable across companies and sectors

  • Use prudent judgement in estimates and valuations

  • Provide relevance and reliability for users, including shareholders, lenders, and regulators

The underlying principles include:

  • Accrual basis: Revenues and expenses are recorded when they’re earned or incurred, not when money changes hands

  • Going concern: Assumes the company will continue trading

  • Consistency: Accounting methods should not change arbitrarily

  • Materiality: Focus is placed on information that would influence decision-making

  • Substance over form: Transactions are recorded based on their economic reality, not just legal form

UK GAAP also sets out specific requirements for how financial items like leases, investments, revenue, and goodwill should be treated.

What Are the Most Important Financial Reporting Standards?

The main standards within UK GAAP are:

  • FRS 102: The core standard replacing old UK GAAP. Covers recognition, measurement, presentation, and disclosure requirements for most financial statements.

  • FRS 105: Designed for micro-entities. Reduces complexity by stripping back some of the disclosures and measurement requirements in FRS 102.

  • FRS 101: For qualifying subsidiaries of listed companies, allowing use of IFRS with fewer disclosures.

Depending on company size, sector, and reporting needs, businesses may apply different FRS rules under the UK GAAP umbrella.

Should UK Companies Use UK GAAP or IFRS?

Whether a company uses UK GAAP or IFRS depends on its structure and regulatory requirements:

  • IFRS is mandatory for companies listed on the London Stock Exchange.

  • UK GAAP is permitted and often preferred by private companies due to its simplicity and reduced disclosure requirements.

  • Groups with subsidiaries may use a mix—e.g., IFRS for consolidated accounts and UK GAAP for individual entities.

UK GAAP is often more cost-effective for SMEs and more familiar to local accountants, making it the default for most private UK businesses.

Do I Have to Comply With UK GAAP?

Yes, if you're preparing financial statements in the UK and not required to use IFRS, you must comply with UK GAAP or relevant parts of the Companies Act 2006. This applies to:

  • Private limited companies

  • Charities

  • LLPs

  • Micro-entities

  • Sole traders (for internal accounts)

Non-compliance can result in regulatory penalties, reputational damage, and issues with lenders, investors or HMRC.

How Can I Make Sure I Comply With UK GAAP?

To stay compliant:

  1. Understand your reporting framework – Know whether FRS 102, 105, or 101 applies.

  2. Stay updated – FRC issues amendments and updates regularly.

  3. Document accounting policies – Clearly outline your company’s approach to revenue recognition, asset valuation, depreciation, etc.

  4. Use qualified accountants – Work with professionals who understand the latest UK GAAP requirements.

  5. Ensure disclosures are complete – Follow presentation and notes guidance in the applicable FRS.

  6. Keep audit trails – Ensure records support reported figures.

Investing in the right systems and advice ensures your reports are accurate and your company stays on the right side of UK accounting law.

Conclusion

UK GAAP remains the core accounting framework for most UK companies, offering flexibility, structure, and relevance for local financial reporting. While IFRS is used by listed entities, UK GAAP allows smaller businesses to report effectively without the complexity of international standards. Whether you're a micro-entity using FRS 105 or a mid-sized firm reporting under FRS 102, understanding the principles and applying them correctly is essential for accurate, compliant accounting.