Big changes are coming to FRS 102 – How can you prepare?

For accounting periods commencing on or after 1 January 2026, FRS 102 is going to be changing in a significant way and businesses need to be ready.

Any business that prepares accounts under UK GAAP should be aware of the impact the changes will have on how financial information is recorded and processed.

What’s changing with FRS 102?

Traditionally, most businesses have recognised revenue when the risks and rewards pass to a customer.

With the updates to FRS 102, the focus is going to shift towards transfer of control of goods or services to the customer.

This will be established through a new five-step model that is inspired by international standards (IFRS 15) and will require a closer examination of the details of contracts.

These five steps are as follows:

1. Identify a contract(s) with a customer
2. Identify promises within the contract(s)
3. Determine the transaction price
4. Allocate the transaction price to the promises
5. Recognise revenue when or as the entity satisfies the promise

Whether you supply goods, services, or a combination of both, you’ll need to understand the terms of your contracts in relation to how the promises within them are delivered. Leases are also being treated differently.

Most leases will now need to be recognised on the balance sheet as both an asset and a liability.

This will serve to provide a clear overview of your obligations, but will increase your reported liabilities.

How can you stay compliant with FRS 102?

As with any significant changes, it is necessary to review your current procedures to find out what you need to change.

These are part of sweeping reforms designed to improve transparency and reduce the risk of errors or misstatements.

Our expert team are on hand to help you review your accounts and highlight the potential impact of these financial reporting changes.

Keep up to date with the FRS 102 changes by talking to our team today!

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