When organisations and businesses in the UK incorporate, they are legally required to prepare financial statements that follow UK Generally Accepted Accounting Practice (GAAP).
These include Financial Reporting Standard (FRS) 102, the UK and Ireland accounting standard for small and medium-sized enterprises (SMEs) and FRS 105, the accounting standard for micro-entities.
Earlier revisions to FRS 102 brought new reforms for accounting periods starting on, or after, 1 January 2026. Now the rules are changing again to ensure UK standards are more closely aligned with international accounting standards.
The Financial Reporting Council (FRC) has announced further amendments to FRS 102 and FRS 105 affecting how certain businesses present their financial statements.
With the changes taking effect over the next two years, now is the time to understand what is coming and how it could affect you.
What are the new FRS 102 changes?
The latest amendments apply to entities using updated Companies Act formats. They include:
- Revised presentation requirements for businesses applying adapted balance sheet and profit and loss formats
- Moving presentation requirements into new appendices within Sections 4 and 5
- Updated definitions of current assets, non-current assets and current liabilities, plus additional application guidance
These changes are taking effect for accounting periods beginning on, or after, 1 January 2027.
Alongside this, earlier reforms came into force for accounting periods beginning on, or after, 1 January 2026 relating to revenue recognition and lease accounting.
Revenue must now be recognised by following a five-step process, which will require the terms and conditions of customer contracts to be reviewed.
In addition, most leases must now be recognised on the balance sheet as a right-of-use asset with a corresponding lease liability.
Instead of a single lease expense being charged to the profit and loss account, businesses must record depreciation and interest separately.
How can you prepare?
To prepare for the current FRS 102 changes, you should review contracts and lease liabilities, plus ensure you have the correct presentation formats in place.
If you are unsure how the new FRS 102 rules will affect your business, now is the time to seek professional advice.
