The latest amendments to FRS 102, introduced by the Financial Reporting Council (FRC), are the most significant changes to financial reporting standards in years. Effective for accounting periods beginning on or after 1 January 2026, they introduce major financial reporting changes with practical implications.

Responding to these changes has proved demanding. Organisations that plan early and assess the impact in advance are better placed to avoid audit and/or financial reporting issues, delays and misstatements and are better placed to manage the transition.

Who Will be Affected?

While the impact will vary, a range of organisations reporting under FRS 102 may be impacted, including:

• Organisations with leased offices, vehicles, equipment or other leased property;
• Businesses operating across multiple locations;
• Organisations with grants, subscriptions, memberships or deferred income arrangements;
• Organisations delivering services over time or under longer-term contracts; and
• Organisations where contracts are complex (e.g. multiple performance obligations, variable consideration, rebates, warranties, etc.)

Even where the accounting impact may be limited, updates to existing practices, processes and reporting arrangements may be required.

Lease Accounting

The revised leasing model will require many leases to be recognised on the balance sheet through the recognition of a right-of-use asset and a corresponding lease liability. While this may appear to be a calculation exercise, successful implementation requires management judgement.  Key areas requiring assessment include:

• Determining the appropriate lease term.
• Evaluating extension and break options.
• Applying short-term and low-value asset exemptions.
• Identifying lease incentives and rent-free periods.
• Separating lease and service components.
• Establishing an appropriate borrowing rate.

These judgements can have a material impact on EBITDA, KPIs, loan covenants, company size thresholds and must therefore be supported by analysis and documentation. Developing a complete understanding of an organisation’s lease population may be the most time-consuming aspects of implementation.

Revenue Recognition

The revised revenue requirements introduce a model based on identifying performance obligations and recognising revenue when those obligations are satisfied. While many simpler revenue streams may remain unchanged, organisations with more complex or longer term arrangements may have to revisit existing accounting treatments and challenge assumptions. Areas that require reassessment include:

• Service contracts.
• Grants and funding arrangements (particularly where these involve performance obligations).
• Membership income and subscriptions.
• Training and educational services.
• Fundraising activities.
• Contracts involving multiple deliverables.

Organisations should consider whether revenue should be recognised over time or at a point in time, whether a contract contains multiple performance obligations, and whether the timing of revenue recognition remains appropriate.

Other Changes to Be Aware of

These are not the only amendments introduced by the revised FRS 102, which also includes clearer fair value measurement guidance, enhanced disclosure guidance for small entities under Section 1A, and new disclosure requirements in areas such as supplier finance arrangements and going concern.

More broadly, these amendments continue the shift towards closer alignment with IFRS, particularly in areas such as leases and revenue.

What Organisations Need to Do

To respond to these changes, organisations should:

• Build a complete lease register;
• Gather and review lease documentation early;
• Review revenue streams and customer contracts;
• Assess systems and processes;
• Engage early.

The FRS 102 amendments are a significant change in financial reporting. Crowleys DFK can support organisations with the implementation of these changes. Our team can assist with:

• Lease identification and assessment
• Lease registers
• Recognition exemptions
• Borrowing rate assessments
• Lease liability and right-of-use calculations
• Opening balance sheet adjustments and ongoing support

We can also help organisations manage the revised revenue requirements through:

• Contract reviews
• Performance obligation assessments
• Revenue policies
• Transition planning including opening balance sheet adjustments and / or restatement of comparatives (where applicable)
• Financial statement disclosures
• Implementation support

FRS 102 Webinar

As part of our client support programme, we will be hosting a webinar in September 2026, covering the practical implications of the FRS 102 amendments.

Further details and registration information will be announced soon.

Conclusion

The 2026 FRS 102 updates mark a significant shift in financial reporting. While these changes may seem demanding, our experts are available to guide you through the transition. Please contact our dedicated FRS 102 implementation support team for further information.