Supporting you with FRS 102
FRS 102 is the standard for financial reporting for UK entities not applying IFRS, FRS 101 (Reduced Disclosure Framework), or FRS 105 (Micro-entities Regime). It sets out the financial reporting requirements for entities, including corporate, non-profit and non-corporate organisations.
In 2024, the FRC issued amendments to FRS 102 following its second periodic review. These amendments aim to better align UK standards with International Financial Reporting Standards (IFRS), particularly those introduced in recent years.
The principal effective date for these amendments is accounting periods on or after 1 January 2026, with early application permitted provided all amendments are applied at the same time.
While the revised FRS 102 requirements will be new for many businesses, the underlying concepts are not new to us. Our team has supported clients transitioning from UK GAAP to IFRS, including the implementation of IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases.
This experience gives us practical insight into the challenges businesses face when adopting new accounting frameworks, from contract reviews and data gathering through to financial reporting impacts, banking covenant considerations, tax implications and stakeholder communication.
We can help businesses understand the revised FRS 102 requirements, identify areas that may be affected and prepare for the associated financial reporting changes.
Now is the time to act.
Have you prepared?
Although these changes will mainly impact finance and reporting functions, they will also extend across the broader organisation. Planning ahead can reduce disruption and support a seamless transition.
Our experts can help you navigate the changes and understand their implications for your business or organisation.
FRS 102 FAQs
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 could reflect increased asset and liability levels. Profit and EBITDA figures may also appear altered, as lease expenses are reallocated between depreciation and interest.
In addition, revenue may shift across reporting periods, which can impact the way results are presented.
Will this impact my bank loans or covenants?
In some cases, yes. Adjustments to leverage levels and EBITDA may influence how covenants are measured. It’s advisable to engage in early conversations with your bank or lender.
What about charities and not-for-profits?
Income from grants and the associated disclosures may require reassessment. Trustees should also think carefully about how the outcomes are communicated to both funders and regulators.
Should my business consider switching to FRS 105?
It may be an option if you meet the criteria for micro-entity status. However:
• FRS 105 involves reduced disclosure requirements, which might not be acceptable to certain lenders or investors.
• You could sacrifice a level of flexibility and clarity in your reporting.
Careful consideration of the pros and cons is essential before deciding.
When should I start preparing?
Immediately. Reviewing contracts, lease agreements, and covenant terms at an early stage can help prevent last-minute issues. There is also the possibility of adopting early if suitable.
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
FRS 102 Webinars
Join us for our upcoming FRS 102 webinar series, hosted by the Sumer Group, where we’ll explore the latest changes and what they mean for your business or organisation.
Webinar topics:
- 15th July: Charities
- 21st July: Higher Education
- 9th September: Corporates
- 16th September: Higher Education
- 23rd September: Charities
To find out more and sign up, please click here.
