Understanding
Financial Reporting Standards (FRS) 102
What is FRS 102?
Understanding the updated UK financial reporting standard
FRS 102 is the core accounting standard used by medium and large entities in the UK and Republic of Ireland under UK GAAP.
From 1 January 2026, the Financial Reporting Council (FRC) introduced significant amendments following its 2024 periodic review to enhance transparency, comparability and alignment with international standards.
Key updates include a new five-step model for revenue recognition and revised lease accounting that brings most leases onto the balance sheet, alongside other enhancements to fair value measurement and disclosures. These changes aim to improve the quality and clarity of financial reporting for users.
Webinar series: A guide to
understanding FRS 102 changes
This series of webinars explore the upcoming changes to FRS 102, providing practical insights to help businesses prepare for the new reporting landscape.
FRS 102:
Preparing for 2026
This webinar provides a clear overview of FRS 102 and the key changes currently impacting UK financial reporting, explaining what FRS 102 is, why it matters, and how the latest updates may affect your organisation. Our host highlights the most important amendments, practical implications, and areas businesses should start preparing for now.
FRS 102 FAQs
- Do these changes affect all businesses?
- What’s the biggest change I need to prepare for?
- How will this affect my financial statements?
- Will this impact my bank loans or covenants?
- What about charities and not-for-profits?
- Should my business consider switching to FRS 105?
- When should I start preparing?
- What practical steps should I take?
- Where can I find more guidance?
Do these changes affect all businesses?
Not all. If you report under FRS 105 (micro-entities regime), you are not directly affected. Most SMEs using FRS 102 will need to comply.
What’s the biggest change I need to prepare for?
Two areas stand out:
- Leases: If you rent property, vehicles, or equipment, you’ll now need to show these on your balance sheet. Please note there are some minor exemptions.
- Revenue: If you have complex or long-term contracts, the timing of when you recognise revenue may shift.
How will this affect my financial statements?
Your balance sheet may show higher assets and liabilities. Profit and EBITDA may look different due to lease costs being split between depreciation and interest.
Revenue may move between periods, affecting reported results.
Will this impact my bank loans or covenants?
Potentially, yes. Changes to gearing and EBITDA could affect covenant calculations. Early discussions with your bank or lender are recommended.
What about charities and not-for-profits?
Grant income recognition and related disclosures may need review. Trustees should consider how results will be presented to funders and regulators.
Should my business consider switching to FRS 105?
Possibly, if you qualify as a micro-entity. However:
- FRS 105 has fewer disclosures, which some lenders and investors may not accept.
- You may lose flexibility and transparency.
It’s important to weigh the benefits and drawbacks before deciding.
When should I start preparing?
Now! Assessing contracts, leases, and covenants early will avoid last-minute disruption. Early adoption is also an option.
What practical steps should I take?
- Review leases and long-term contracts
- Model the potential impact on your accounts
- Update accounting systems if needed
- Train your finance team
- Speak to your advisers to plan ahead
Where can I find more guidance?
We will be publishing blogs, sector-specific guides, and hosting webinars over the next year. Our team can also provide tailored advice for your business.
Latest FRS 102 articles
Understanding the Tax Implications of FRS 102 Changes
From 1 January 2026, some important updates to FRS 102 come into effect. This is the accounting standard most UK companies use, and the upcoming changes - especially around how leases are shown in your accounts - will also impact how much Corporation Tax you pay, and crucially, when you pay it. As we move
Preparing your business for its first statutory audit
If you’re reading this, chances are you’re getting ready for, or are already in the middle of, your company’s first audit. This article outlines how to prepare effectively, what to expect, and how a well-managed audit can benefit your business far beyond compliance. Why being prepared matters Audits can be seen as a statutory “tick-box”
FRS 102 Amendments: What Businesses Need to Know Ahead of January 2026
The Financial Reporting Council (FRC) has completed its periodic review of FRS 102 – The Financial Reporting Standard applicable in the UK and Republic of Ireland. These are the most significant changes since the standard was introduced almost a decade ago. The amendments will apply to accounting periods beginning on or after 1 January 2026,