News
Big changes are coming to FRS 102 – How can you prepare?
07 October 2025
From January 2026, FRS 102 is going to be changing in a significant way and businesses need to be ready.
Any business that prepares accounts under UK GAAP should be aware of the impact the changes will have on how financial information is recorded and processed.
What’s changing with FRS 102?
Traditionally, most businesses have recognised revenue when the risks and rewards pass to a customer.
With the updates to FRS 102, the focus is going to shift towards transfer of control of goods or services to the customer.
This will be established through a new five-step model that is inspired by international standards (IFRS 15) and will require a closer examination of the details of contracts.
These five steps are as follows:
- Identify a contract(s) with a customer
- Identify promises within the contract(s)
- Determine the transaction price
- Allocate the transaction price to the promises
- Recognise revenue when or as the entity satisfies the promise
Whether you supply goods, services, or a combination of both, you’ll need to track exactly what is delivered and when. Leases are also being treated differently.
Most leases will now need to be recognised on the balance sheet as both an asset and a liability.
This will serve to provide a clear overview of your obligations, but will also increase your reported liabilities.
Updates to Sections 2 and 2A will align them with international standards.
Part of this includes an explainer of how fair value is measured, alongside updates to the overall concepts used across the standard.
How can you stay compliant with FRS 102?
As with any significant changes, it is necessary to review your current procedures to find out what you need to change.
These are part of sweeping reforms designed to improve transparency and reduce the risk of errors or misstatements.
Failure to keep pace will result in penalties, so start preparing now.
Our expert team are on hand to help you review your accounts and highlight potential risk areas so that you can be prepared for the January 2026 deadline.
Keep up to date with the FRS 102 changes by talking to our team today!
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