On 1 January 2026, the Financial Reporting Council (FRC) introduced amendments to the UK accounting standard, FRS 102. These changes, which apply to accounting periods beginning on or after that date, are designed to bring the standard more closely in line with international accounting requirements.
This is the most substantial update to the UK accounting standards since 2013 and the impact for each business will vary greatly depending upon the nature of the entity’s operations and activities.
It is therefore important that companies plan early to ensure a smooth implementation and avoid any unwanted surprises. To support this planning, the team at Forvis Mazars are highlighting the key changes, impacts and considerations you should be thinking about now.
What are the key changes?
Whilst there are several changes that will impact an entities financial statements, there are two key changes where there is likely to be the greatest impact.
1. Revenue recognition
Changes to revenue recognition under FRS 102 will mean companies must give more thought to the goods and services that are being provided to their customers and will require a more detailed contract review off the back of this to ensure any differing terms have been considered.
Businesses should watch out for;
– Buddled offerings of different products (also where bundles consist of both goods and services/support)
– Warranties
– Variable consideration.
The impact of these changes will mean a possible shift in the timing of revenue recognition, which therefore could affect profit patterns that are reported.
2. Lease Accounting on balance sheet for Leases
Under FRS 102 all significant leases are required to be added to the balance sheet, with there being a ‘right of use asset’ recognised, as well as a ‘lease liability.
In addition, the ‘rent’ charge will be adjusted from the profit and loss account and replaced with a depreciation and interest charge.
As a result, the metric ‘earnings before interest, tax amortisation and depreciation’ (known as EBITDA) as well as gearing ratios will be impacted.
Many bank covenants, bonus scheme calculations and performance appraisals are dependent on these metrics and therefore it is key to understand how these are going to have an impact on your business, so you can fully understand the impacts of this change to your financial statements.
Three Ways Forvis Mazars can help
Forvis Mazars has qualified and experienced professionals who are well-versed in assisting with these changes. They are offering the following support:
– An In-person Update Session at their Poole office on 26 Feb. This expert-led session for clients and prospects will share insights and approaches to ensure a smooth implementation.
– Impact Assessment Workshops for businesses – during this workshop, the team will conduct diagnostics to review revenue contracts and lease documents for you.
– Accounting policy and disclosure support – so assistance can be given when it comes to preparing the year-end financial statements.
Get in touch
If you have any questions or are looking for further guidance, please reach out to your Forvis Mazars contact or Lara Brennan, who is a partner in our Poole office. For more information please contact Lara.Brennan@mazars.co.uk or call 01202 680777.
https://www.forvismazars.com/group/en