24 Nov FRS 102 Is Changing in January 2026: What Finance Teams Need to Know..
The Financial Reporting Council’s (FRC) Periodic Review 2024 introduces major updates to FRS 102 from 1 January 2026. According to the FRC, the biggest changes affect lease accounting, revenue recognition, and disclosures, with some supplier-finance disclosures applying a year earlier (2025).
This is a significant shift for any organisation reporting under UK GAAP.
What’s Changing?
Leases on the Balance Sheet
As outlined by ICAEW and KPMG, most leases will now be recognised as:
- a right-of-use asset, and
- a lease liability.
This removes the old operating-lease treatment and will impact EBITDA, net debt and other key metrics.
A New Revenue Model
Grant Thornton and BDO highlight that Section 23 now follows a simplified 5-step IFRS 15-style model. This may change revenue timing for service-based or bundled contracts.
Other Updates
The FRC has:
- updated its Conceptual Framework,
- introduced a new Fair Value Measurement section, and
- expanded disclosure requirements (ACCA notes this will require more data and clearer narrative).
What It Means for Finance Teams
Across commentary from the FRC, ICAEW, and major audit firms, the message is consistent: expect changes to balance sheets, KPIs, covenants, systems, and internal controls.
Comparatives don’t need to be restated, but transition requires careful planning.
How to Prepare
Industry guidance recommends:
- Impact assessment: Review all leases and customer contracts; model EBITDA and covenant impacts.
- Update policies: Define new lease and revenue recognition approaches.
- Systems readiness: Ensure ERP/lease software can support RoU assets and new disclosures.
- Stakeholder engagement: Inform lenders, boards, and remuneration committees early.
Final Note
This summary draws on guidance from the FRC, ICAEW, ACCA, KPMG, Grant Thornton, and BDO. Their collective advice is clear: start preparing now for a smooth transition in 2026.