FRS 102 HUB

If you run a UK business, the changes to the FRS 102 accounting standard could have a significant impact.

With the amended FRS 102 accounting standard becoming mandatory for periods beginning on or after 1 January 2026, the transition window for companies is shrinking. The good news is that with the right plan in place, your core work can be delivered in good time for reporting under the new rules in 2026.

Our summary of the main changes

Revenue recognition

Key impact summary:

IFRS 15 five step model replaces old UK GAAP revenue recognition concepts with some key simplifications compared to IFRS Recognition at a “point in time” vs “over time”
Contract costs taken into account
Disclosures aligned to “IFRS for SMEs”
Optional restatement of comparative information

Lease accounting

Key impact summary:

Lessee accounting

◦ Based on the IFRS 16 on-balance sheet model
◦ Recognition of right-of-use asset and lease liability
◦ Operating lease expense replaced with depreciation on right-of-use asset and interest charge on lease liability
◦ Cashflows discounted using an ‘obtainable borrowing rate’
◦ Increased disclosures
◦ Restatement of comparatives not required

Lessor accounting largely unchanged

Preparing for the new FRS 102 rules

Our experts in FRS 102 are here to help you stay ahead. In our video guides, Co-Head of Audit, Katherine Rose, and Head of Audit Excellence, Aron Kleiman, will give you an overview of what’s changing, drill down into the changes to lease accounting and revenue recognition, and share practical tips on how to ensure your business is ready.

Watch our video series for an overview of what’s changing under FRS 102, with focuses on lease accounting and revenue recognition.

Introduction to FRS 102

Summarising the changes to FRS 102 from January 2026, the major effects that these could have on your business, and the importance of starting your planning now.

Lease accounting under FRS 102

Unpicking how the FRS 102 changes will affect how businesses account for operating leases by bringing them onto their balance sheets. Find out about the potential impact on your business metrics, and how you and your team should be getting ready.

Revenue recognition under FRS 102

Explaining how the changes to FRS 102 will alter how businesses recognise revenue. Learn about the new five-step model, how your business could be impacted, and the actions you should take to get ready.

What should firms do to prepare for FRS 102

To break down your transition into a manageable process, we recommend following these six steps.

Step 1: Scoping Step 2: Gathering data Step 3: Transition calculations Step 4: Tax impacts Step 5: Systems & controls Step 6: Disclosure preparation

The foundation of a smooth transition is identifying exactly what is affected.

Identify affected entities and contracts. If your business has significant lease arrangements or complex revenue contracts, you should begin this as soon as possible
Assess practical expedients for transitional or ongoing benefit, such as exemptions for short-term leases (12 months or less) and low-value assets

Your finance team will need more granular information than before.

Compile data on lease terms, renewal options, variable rents, revenue contracts, performance obligations and termination rights

Completing this repository early will save you time and uncertainty later. It will also enable accurate transition calculations as your next step.

This is where technical adjustments are determined.

Key judgements and estimates are made at this stage and should be fully documented, as accuracy here underpins audit readiness.

Calculate and recognise lease liabilities at present value, and right-of-use assets applying chosen expedients
Reassess revenue timing under revenue timing under the new five-step model (listed in our article here) focussing on transfer of control, and calculate any tax or deferred tax impacts

The foundation of a smooth transition is identifying exactly what is affected.

Identify affected entities and contracts. If your business has significant lease arrangements or complex revenue contracts, you should begin this as soon as possible
Assess practical expedients for transitional or ongoing benefit, such as exemptions for short-term leases (12 months or less) and low-value assets

Your finance team will need more granular information than before.

Compile data on lease terms, renewal options, variable rents, revenue contracts, performance obligations and termination rights

Completing this repository early will save you time and uncertainty later. It will also enable accurate transition calculations as your next step.

This is where technical adjustments are determined.

Key judgements and estimates are made at this stage and should be fully documented, as accuracy here underpins audit readiness.

Calculate and recognise lease liabilities at present value, and right-of-use assets applying chosen expedients
Reassess revenue timing under revenue timing under the new five-step model (listed in our article here) focussing on transfer of control, and calculate any tax or deferred tax impacts

Communication is key

To help this process run as smoothly as possible:

Share impacts internally across finance and operations and externally with auditors, lenders and investors to avoid surprises
Engage early with auditors to confirm interpretations and avoid last-minute adjustments

Next steps

The changes introduced by the latest amendments to FRS 102 will require changes to systems and processes which will make the short implementation timeframe complex and expensive. It is highly recommended that companies act early and perform a detailed impact assessment.

Where multiple or complex revenue or leasing arrangements exist, the impact assessment should initially focus on the primary financial statement impact.

However, it is important to understand that implementation will go beyond a desktop exercise. A project-based approach should be applied, with a full implementation timetable and plan assessing the impact across:

Teams, systems and processes requirements in order to capture relevant data appropriately to ensure complete and accurate accounting. As it relates to revenue, collating and analysing customer contracts, and for leases, ensuring data complete and accurate with any lease modifications post-transition, communicated in a timely manner.
Financial performance and KPIs, including monthly and annual financial results and annual reporting disclosures.
Internal and external reporting timetables and month end procedures.
Key stakeholders and communication strategy.
Any debt covenants included in lending arrangements.

How BKL can help

With increased admin, more complex reporting requirements and new calculations to get used to, we appreciate how daunting the updated FRS 102 rules may feel.

We’re experienced at guiding business owners and their teams through the practical impacts of changes to accounting standards. We’re here to help you to navigate the lease and revenue changes – from explaining the effect on your numbers including taxation through to improving your systems and processes – so that you maintain clear, compliant financial reporting as you take your business forward.

For a chat about how we can help your business to prepare for the new accounting standards, contact your usual BKL contact or one of our specialists below.