Two key accounting standards under UK GAAP (FRS 102) are changing, affecting how businesses recognise revenue and account for leases.<\/p>\n
These updates apply to accounting periods beginning on or after 1 January 2026, meaning the time to start preparing is now.<\/p>\n
These changes are particularly relevant for businesses that:<\/p>\n
For many organisations, the impact will go beyond disclosure. The changes may alter the timing of reported income, increase assets and liabilities on the balance sheet, and affect key ratios, covenants and performance metrics. Early preparation is critical to avoid surprises and maintain control over financial reporting.<\/p>\n
These updates bring UK GAAP closer to IFRS and are designed to better reflect the economic substance of transactions.<\/p>\n
However, they also introduce more judgment and may significantly affect:<\/p>\n
The revised revenue recognition standard introduces a contract-led approach. Revenue will now be recognised based on what has been promised to the customer and when that promise is satisfied, focusing less on when risks and rewards are transferred and rather on when the transfer of control occurs<\/p>\n
Businesses with service-based contracts, phased delivery or bundled arrangements may see changes in revenue timing and reported results. Revenue is recognised using a 5-step model:<\/p>\n
The new standard also includes specific rules for recognizing contract modifications and the cost of contracts. Disclosures in the financial statements have been expanded to include:<\/p>\n
All leases will now be recognised like a finance lease and will be recognised on the balance sheet through a right-of-use asset and a corresponding lease liability. This may lead to larger balance sheets, changes to gearing and new conversations with lenders. There are some exceptions, for example short-term leases (12 months or less) and low-value asset leases.<\/p>\n
Some other key changes worth noting include:<\/p>\n
Disclosures in the financial statements have been expanded to include:<\/p>\n
We recommend that businesses:<\/p>\n
Early preparation is key ahead of the upcoming implementation deadline.<\/p>\n","protected":false},"excerpt":{"rendered":"
What the Changes Mean, Who They Affect and How to Prepare Two key accounting standards under UK GAAP (FRS 102) are changing, affecting how businesses recognise revenue and account for leases. These updates apply to accounting periods beginning on or after 1 January 2026, meaning the time to start preparing is now. These changes are[…] <\/p>\n