The revised version of FRS 102 has now come into effect for accounting periods starting on or after 1 January 2026 and it will affect how your business prepares accounts under UK GAAP.<\/p>\n
<\/p>\n
These changes will affect how revenue and leases are accounted for and apply to most entities, including small and medium-sized businesses.<\/p>\n
With the changes now in effect, your business must ensure your accounting systems and financial reporting are compliant.<\/p>\n
The most important changes to FRS 102 are to revenue recognition and lease accounting.<\/p>\n
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.<\/p>\n
This requires businesses to reassess customer contracts, particularly those involving bundled services, variable consideration, warranties or contract modifications.<\/p>\n
Even though the timing of revenue recognition has not changed, the level of analysis and documentation required has increased.<\/p>\n
Lease accounting has also undergone major changes. Most leases must now be recognised on the balance sheet through a right-of-use asset and a corresponding lease liability.<\/p>\n
Instead of recognising a single lease expense in the profit and loss account, you must now record depreciation of the asset and interest on the lease liability.<\/p>\n
While there are exceptions for short-term leases and leases of low-value assets, many property and vehicle leases will affect your balance sheet and reported performance.<\/p>\n
Businesses must assess their opening balances on or after\u00a0January 1 2026 and ensure they have been calculated correctly for when their accounting period begins.<\/p>\n
This includes recognising lease assets and liabilities and making the required adjustments in retained earnings.<\/p>\n
It is crucial you remain aware of when your accounting period starts and seek financial advice to ensure your accounts and financial reporting is in order.<\/p>\n
Customers\u2019 contracts and lease agreements should be reviewed in full to ensure they are being accounted for correctly.<\/p>\n
This includes identifying any leases embedded within service contracts.<\/p>\n
Businesses should also consider whether their existing systems and processes remain appropriate for the new requirements.<\/p>\n
The ongoing assessment of leases, discount rates and contract changes may require more robust systems than those previously used.<\/p>\n
In addition, the impact of the changes on metrics such as EBITDA, profit and net debt must be reviewed carefully.<\/p>\n
This is particularly important where bank covenants, incentive arrangements or earn-out agreements are in place.<\/p>\n
These changes also affect your lenders and investors and you must maintain clear communication throughout this process.<\/p>\n
Even though your cash flow remains the same, financial results may differ and stakeholders should understand the reasons behind any movements.<\/p>\n
While some businesses may still have time to prepare, other businesses\u2019 accounting periods may have already begun.<\/p>\n
Businesses have a responsibility to keep their accounts and financial reporting compliant and must seek financial support if they are unsure when these requirements come into effect.<\/p>\n
Revenue recognition and lease accounting require extensive preparation. Businesses must be proactive if they want to move forward with confidence under the new accounting framework.<\/p>\n
We can help support your businesses through the implementation and review of your calculations and recognition policies.<\/p>\n
Our expert team can help implement lease accounting models and ensure your financial statements include the correct disclosures.<\/p>\n
For expert financial advice and support, contact our team today.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The revised version of FRS 102 has now come into effect for accounting periods starting on or after 1 January 2026 and it will affect how your business prepares accounts under UK GAAP.<\/p>\n","protected":false},"author":2,"featured_media":6787,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,24,125,44],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6784"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6784"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6784\/revisions"}],"predecessor-version":[{"id":6785,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6784\/revisions\/6785"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6787"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}