Navigating the 2026 FRS 102 Amendments 🗒️

 

 

The Financial Reporting Council (FRC) has introduced significant changes to FRS 102, the UK’s financial reporting standard for entities not applying full IFRS. These updates mark one of the most substantial revisions in recent years, and they’re likely to impact businesses of all sizes across many sectors. 

 

Whether you’re a small entity or a large group, these amendments could affect how you recognise revenue, account for leases, prepare disclosures, and even how you plan strategically. The time to start preparing is now. 

 

📘 What Is FRS 102? 

 

FRS 102 is the key accounting standard for many UK entities, particularly private companies, charities, LLPs, and others not using IFRS. It governs how you prepare financial statements, which impacts tax, borrowing, investor confidence, and commercial decisions. 

 

The recent changes follow the FRC’s second periodic review of UK GAAP and bring FRS 102 more closely in line with international standards (IFRS 15 and 16) while maintaining some UK-specific simplifications. 

 

🔄 What’s Changing – and Why Does It Matter? 

 

These updates are designed to improve transparency and consistency, especially in revenue and lease reporting, two of the most critical areas in financial accounting. 

 

Here’s a breakdown: 

 

💸 1. New Revenue Recognition Model 

 

FRS 102 will now use a five-step model, based on IFRS 15, to determine when and how revenue is recognised. The new model requires companies to: 

 

Identify contracts with customers 

 

Identify separate performance obligations 

 

Determine the transaction price 

 

Allocate the transaction price to the performance obligations 

 

Recognise revenue when (or as) performance obligations are satisfied 

 

Why this matters: 

 

Many businesses, particularly those with complex contracts, service bundles, or variable consideration — may see a change in the timing and pattern of revenue recognition. For example, revenue may be delayed or accelerated compared to previous practices. 

 

You’ll need to carefully reassess all customer contracts under the new rules, which could affect your profit margins, financial KPIs, and even bonus schemes or debt covenants. 

 

🏢 2. Lease Accounting Overhaul 

 

Lessees will now need to bring most leases onto the balance sheet, recognising a: 

 

Right-of-use (ROU) asset 

 

Lease liability 

 

This eliminates the operating lease classification for lessees (which previously kept many assets off the balance sheet), aligning with IFRS 16 principles. 

 

Short-term and low-value leases are exempt, but otherwise, this change will affect balance sheets, EBITDA, and financial ratios. You’ll need to assess every lease arrangement and prepare models to capture the correct treatment. 

 

Lessors see fewer changes, but lessee entities must act now. 

 

🧾 3. Additional Changes Worth Noting: 

 

Clarity for Small Entities using Section 1A 

 

Updated Section 2 (Concepts and Pervasive Principles) aligned with IASB’s Conceptual Framework 

 

New Section 2A on Fair Value Measurement 

 

Supplier Finance Arrangements must now be disclosed (from 1 Jan 2025) 

 

Updated business combination guidance, including treatment of contingent consideration 

 

Phasing out IAS 39 adoption options (unless required for group reporting) 

 

⏳ When Do These Changes Take Effect? 

 

Most changes: Apply to accounting periods starting on or after 1 January 2026 

 

Supplier finance disclosures: Effective from 1 January 2025 

 

Early adoption is permitted if all amendments are applied at once 

 

⚠️ What This Means for Your Business 

 

These aren’t just technical accounting changes. They could impact your: 

 

📉 Reported profits and retained earnings 

 

💰 Borrowing capacity and debt covenants 

 

📊 Internal KPIs and management reporting 

 

🧾 Tax liabilities and timing of deductions 

 

🧠 Systems, processes, and finance team capacity 

 

The transition also brings practical challenges: reviewing contracts, updating systems, training staff, and revising financial models. 

 

🧠 How JSB Accountants Can Help 

 

At JSB Accountants, we’re already helping clients prepare for the road ahead. Our services include: 

 

✅ Impact Assessments – Tailored analysis of how the changes affect your revenue, leases, and metrics 

✅ Workshops & Training – Focused sessions for your finance, commercial, and leadership teams 

✅ Policy Review – Drafting and reviewing accounting policies and revenue recognition memos 

✅ Modelling – Assistance in applying new rules to real contracts 

✅ System Readiness – Ensuring your processes and controls are aligned 

✅ Disclosure Support – Helping you update your notes to meet the new requirements 

 

📩 Let’s Talk 

 

Whether you're a growing business or a well-established company, these FRS 102 updates are too significant to ignore. We’re here to help you plan early and adapt smoothly. 

 

📲 DM us or get in touch via our website to speak to an advisor or message us below on Instagram 

 

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