The FRS 102 amendments are effective for accounting periods beginning on or after 1 January 2026 and could affect how businesses recognise revenue, account for leases and report key financial metrics.
For some businesses, the changes may impact reported revenue, balance sheets, EBITDA, covenants, systems, data and stakeholder reporting.
Menzies has created a practical FRS 102 amendments guide and impact checklist to help you identify what the changes could mean for your business.
What has changed under FRS 102?
Download our FRS 102 Amendments Checklist & Guide below
Download our FRS 102 amendments overview and checklist
Download our FRS 102 amendments guide
Our guide explains the key FRS 102 amendments and what businesses should be doing now to prepare.
Inside the guide, we cover:
- The effective date and transition requirements.
- The new five-step revenue recognition model.
- Key revenue areas including warranties, principal versus agent assessments, upfront fees, customer options and contract modifications.
- The new lease accounting model for lessees.
- Lease recognition exemptions, discount rates, lease terms and modifications.
- Revenue and lease disclosure requirements.
- Practical checklists to help assess the potential impact on your business.
Whether you are at the start of your FRS 102 impact assessment or already reviewing contracts and leases, the guide is designed to help you understand the areas where further technical analysis may be needed.
Why the FRS 102 amendments matter
The amendments may affect more than the figures in your year-end accounts. Depending on your contracts and lease arrangements, they could change the timing of revenue recognition, bring more leases onto the balance sheet and alter how key financial metrics are presented.
For some businesses, this could affect:
- Timing of revenue recognition.
- EBITDA and profit margins.
- Gearing and liquidity ratios.
- Earnings per share.
- Loan covenants and funding arrangements.
- Bonus schemes, earn-outs or share option arrangements.
- Systems, data and reporting processes.
- Accounting policies and financial statement disclosures.
Even where management concludes that the revised requirements do not materially change revenue recognition or lease accounting, the assessment process should still be documented to support that judgement.
What should businesses be doing now?
Preparation will be essential to ensure a smooth transition to the revised FRS 102 requirements.
Businesses should consider:
- Reviewing customer contracts and lease arrangements
Identify significant revenue streams, contract types, lease populations and embedded lease arrangements. - Assessing the financial impact
Consider the potential effect on financial statements, KPIs, covenants, funding agreements and stakeholder reporting. - Checking systems and data
Review whether the information needed to apply the new requirements is available, reliable and complete. - Updating accounting policies and disclosures
Consider whether existing accounting policies, technical papers and disclosure processes need to be updated. - Engaging advisers and stakeholders early
Early engagement can help avoid surprises and ensure the business is ready before the first reporting period affected by the amendments.
Tools available on request
Lease accounting template available
To assist with calculating the lease liability and right of use asset.
Revenue recognition framework available
To help management work through the revised 5 step model.
How Menzies can help?
Menzies can support businesses through the transition to the revised FRS 102 requirements.
Our team can help with:
- GAAP impact assessments to identify and evaluate the amendments, quantify their effects and communicate the implications to key stakeholders.
- Detailed revenue recognition and lease accounting analysis.
- Tailored accounting policies and technical papers to support the application of the new standards.
- Financial statement preparation, including compliance with the latest disclosure requirements.
- Practical support using revenue recognition and lease accounting frameworks, templates and checklists.
Speak to our FRS 102 specialists
The FRS 102 amendments require judgement, planning and clear documentation. Our specialists can help you assess the impact on your business and prepare for the transition.
Accessible Webinars
Overview and how to prepare
PART 1 FRS 102 Technical Update Webinar
Building the basics and exploring complexities
PART 2 FRS 102 Technical Update Webinar
FRS 102 FAQs
Take a look at our frequently asked questions and get the answers you need.
What are the significant amendments to UK GAAP?
The most significant changes are to revenue recognition and lease accounting, aligning them more closely with IFRS 15 and IFRS 16 respectively.
When do these changes become effective?
Almost all amendments are effective for accounting periods beginning on or after 1 January 2026, with the exception of the new disclosures around supplier finance arrangements which are effective for periods commencing 1 January 2025.
Are there any other amendments?
Yes, there are several more minor changes and clarifications to UK GAAP, including:
– Greater clarity on disclosures required for small entities applying Section 1A of FRS 102 to ensure a true and fair view.
– Enhanced guidance on fair value measurement to reflect the principles under IFRS 13.
– Updates to FRS 102 concepts and principles to align with IASB’s 2018 Conceptual Framework.
– New disclosure requirements for supplier finance arrangements.
– Removal of the option to adopt recognition and measurement requirements of IAS 39 for financial instruments, except where necessary for consistency with group accounting policies.
Can I early adopt the new requirements now?
Yes, early adoption is permitted provided that all amendments are applied at the same time.
Do all leases need to go on balance sheet?
Following the change to leases, the distinction between finance and operating leases is removed and instead a ‘right-of-use asset’ and corresponding liability is recognised on balance sheet, meaning most lessees with operating leases will be impacted.
There are two exemptions to this approach however, for short term leases (leases with a term of less than 12 months) and leases of low value assets.
There is a practical expedient on transition to the new lease accounting, whereby any leases with 12 months or less to run from the initial application date, can be treated as ‘short term’ and are exempt therefore from the above.
For low value assets, FRS 102 does not assign a monetary threshold for low-value and does not provide examples of what these are, instead it provides a list of examples of assets that are not considered to be low value, this includes certain assets such as cars, boats, land and buildings and aircrafts.
If I’m a small company will these changes impact me?
Yes, both revenue recognition and lease accounting changes will be applicable to small companies reporting under FRS 102 1A. Micro entities reporting under FRS 105 will also be impacted by the changes to revenue recognition.
What are the changes to revenue recognition?
There is a new model of revenue recognition, based upon the five-step model for revenue recognition under IFRS 15.
The five-step model involves:
Identifying the contract (or contracts) with a customer;
Identifying the promises in the contract;
Determining the transaction price;
Allocating the transaction price to the promises in the contract; and
Recognising revenue when (or as) the entity satisfies a promise.
The individual terms of an entit
How do I transition to the new standard?
For leases, on transition, restatement of comparatives is not permitted, however any cumulative impact of initially applying the standard is recorded as an adjustment to opening retained earnings at the date of initial application.
As a practical expedient for a lessee that is already preparing IFRS 16 information for group reporting, they can, at the date of initial application recognise the IFRS 16 carrying amounts as its right of use asset and lease liability.
For revenue recognition, entities have a choice to either
Apply the changes fully retrospectively, whereby comparatives are restated, or
Apply a modified retrospective approach, where comparatives are not restated and instead you recognise any cumulative effect of initially applying the standard as an adjustment to opening retained earnings.
What practical changes should I prepare for?
The changes to UK GAAP are significant, and it is therefore important to start assessing and preparing for the impact of these changes early, to ensure the transition will be as smooth as possible.
As a practical point, you may want to begin by summarising and analysing all leases on a lease register including the lease term and future payments.
In addition, you should consider the impact these changes will have on contracts with customers and identify specific contract terms and performance obligations.
These changes may affect financial performance measures, which could in turn impact loan covenants. Companies will also need to consider how they may influence performance metrics used in arrangements such as bonus structures and share option schemes.