If you report under UK GAAP, you will probably need to get clued up on the revised version of FRS 102 and how it will affect your accounting period this year.

The way your revenue and leases are accounted for has undergone a makeover and this will apply to most entities, including small and medium-sized businesses.

Now that the changes are starting to affect accounting periods commencing on or after 1 January 2026, you need to check that your systems and financial reporting are remaining compliant.

What are the FRS 102 changes?

Some of the biggest changes to FRS 102 to note are those of revenue recognition and lease accounting.

Your revenue must now be recognised using a five-step model that focuses on when control of goods or services passes to the customer, rather than when risks and rewards transfer.

This means that your business needs to reassess its customer contracts, particularly those involving bundled services, variable consideration, warranties or contract modifications.

Lease accounting has also been targeted by the reforms.

Most leases will now need to be recognised on your balance sheet through a right-of-use asset and a corresponding lease liability.

It’s time to move on from recognising a single lease expense in the profit and loss account. You should instead record depreciation of the asset and interest on the lease liability.

There are still some exceptions for short-term leases and leases of low-value assets, but many property and vehicle leases will affect your balance sheet and reported performance.

What should your business be doing now?

Whenever your accounting period begins this year, you need to assess your opening balances and ensure they are calculated correctly.

It is also crucial that you recognise your lease assets and liabilities and make the necessary adjustments in retained earnings.

Get checking those customer contracts and lease agreements to ensure they are being accounted for correctly.

Whenever new requirements come into play, it is always a good idea to assess whether your existing systems and processes are still appropriate.

The ongoing assessment of leases, discount rates and contract changes will require more robust systems that need to keep up.

In addition, the impact of the changes on metrics such as EBITDA, profit and net debt must be reviewed carefully.

If you have bank covenants, incentive arrangements or earn-out agreements in place, the spotlight is on you to remain compliant.

These reforms will also have a knock-on effect on your lenders and investors and you need to keep them updated throughout this process and if any amendments are made.

Some businesses that you work with may have already begun complying with the new FRS 102 rules and they may require information to be presented differently or their own may look different.

How can you keep your finances compliant?

We know that many of our clients feel the pressure of having to keep their accounts and financial reporting compliant when new reforms come in and that is where we are here to ease some of the pressure.

We can support you through the implementation of the new revenue recognition and lease accounting processes and review your calculations to check that the numbers add up.

Our expert team can be that additional layer of verification that your financial statements include the correct disclosures.

Do you need support updating your processes with the FRS 102 changes? Get in touch.