{"id":3440,"date":"2026-01-14T09:37:46","date_gmt":"2026-01-14T09:37:46","guid":{"rendered":"https:\/\/www.robbtax.co.uk\/blog\/?p=3440"},"modified":"2026-01-14T09:38:09","modified_gmt":"2026-01-14T09:38:09","slug":"the-frs-102-changes-are-now-in-effect-what-should-businesses-do-now","status":"publish","type":"post","link":"https:\/\/www.robbtax.co.uk\/blog\/the-frs-102-changes-are-now-in-effect-what-should-businesses-do-now\/","title":{"rendered":"The FRS 102 changes are now in effect: What should businesses do now?"},"content":{"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

<\/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

What are the FRS 102 changes?<\/strong><\/h3>\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

What should businesses do now?<\/strong><\/h3>\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

How can you keep your finances compliant?<\/strong><\/h3>\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":"

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