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Are you ready for the upcoming changes to FRS 102?

by Jessica Teague

2 April 2024

The Financial Reporting Council (FRC) is making changes to FRS 102 with the aim to improve transparency, comparability, and consistency of financial statements. Read our summary of the key amendments and how we can help you with the transition to the new accounting standards.

On 27 March 2024, The Financial Reporting Council (FRC) unveiled the long-anticipated amendments to FRS 102. These changes mark a significant shift in financial reporting standards, aimed at enhancing transparency, comparability, and consistency across financial statements.

In 2024 it is expected that the Financial Reporting Council (FRC) will issue further guidance and revise the current factsheets to reflect the updated requirements of FRS 102.


What is FRS 102?

FRS 102 is the main standard for financial reporting in the UK and Ireland and it is relevant to entities that do not use international accounting standards, FRS 101 or FRS 105.

FRS 102 applies to financial statements that are intended to give a true and fair view of a reporting entity’s financial position and profit or loss for a period. It applies not only to companies but also to other types of entity.

The recent revisions to FRS 102 are part of the Financial Reporting Council’s (FRC) commitment to keeping standards relevant, reflective of current economic conditions, and aligned with international best practices.


What are the key changes to FRS 102?

As expected, a major part of these changes is the revision of the accounting for leases and revenue recognition, which are now more consistent with IFRS (International Financial Reporting Standards).


There will no longer be a distinction between operating and finance leases and the result will be that more leases will now be recognised on the balance sheet with an asset and a liability (similar to finance lease accounting). However, exceptions will be made, and leases pertaining to low-value assets and short-term leases will continue to be excluded from the balance sheet.

Revenue recognition

There is now a five-step approach for recognising revenue from all customer contracts, which is more aligned to IFRS 15 Revenue from Contracts with Customers. This model is based on identifying the specific goods or services promised to the customer and determining the amount of payment the organisation is expected to receive in return. There may potentially be an impact to the timing of revenue recognition.

Simplification and clarification

Additionally, the FRC has introduced enhancements and clarifications to simplify the application of FRS 102 for preparers.


What are the costs of updating FRS 102?

Whilst there will be associated implementation costs, the FRC states that they have taken care to ensure changes are proportionate and that unnecessary reporting burdens are removed.

Businesses will need to consider whether the current systems in place are equipped to deal with the changes to FRS 102. Entities may need to modify their accounting policies, implement new systems for collecting and analysing data, and provide training to staff or seek external expertise to comply with the new requirements.


When will the FRS 102 changes take effect?

The amendments are set to be effective for accounting periods commencing on or after 1 January 2026. Early adoption is allowed so long as all amendments are applied at the same time.

We recommend that all businesses start thinking about the changes and planning for the implementation as soon as possible.


How can we help?

Our experienced team is ready to help you with the transition to the new accounting standards.

We are committed to supporting you through this transition, ensuring that your business not only complies with the new requirements but also leverages them to enhance financial management and reporting practices.


Please get in touch if you need any support or additional information.



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