Significant updates to FRS 102 are coming into effect for accounting periods beginning on or after 1 January 2026, following the Financial Reporting Council’s periodic review.
These changes bring UK GAAP closer to international standards and will notably impact how businesses report leases and revenue.
Key changes include:
- Lease accounting: Most leases will now appear on the balance sheet as right-of-use assets and liabilities, replacing the old operating vs finance lease distinction.
- Revenue recognition: A new five-step model requires businesses to identify performance obligations and recognise revenue accordingly.
- Other updates: Revisions also affect fair value measurement, business combinations, tax provisions, and supplier finance disclosures.
Why it matters
These reforms will reshape financial statements, influence EBITDA optics, and affect covenants, reporting systems and tax treatments. Early preparation is essential to avoid disruption and ensure compliance.
