The Financial Reporting Council (FRC) has announced changes to FRS 102 (the financial reporting rules for UK companies) that will take effect from 1 January 2026 (though you can choose to apply them earlier). These changes aim to make UK reporting more consistent with international standards. Here’s a simple breakdown of what’s changing and how it could affect your business:

1. New rules for recognising revenue
   Revenue recognition will now follow a model similar to IFRS 15 (the international standard), but with some simplifications to make it easier to apply. This means you’ll need to recognise revenue more consistently based on when goods or services are provided, which could affect the timing of when you report income.
2. New rules for lease accounting
   If your business rents property, equipment, or vehicles, you’ll need to show most leases directly on your balance sheet (in line with IFRS 16). This means leases will be recorded as assets and liabilities, which could affect your reported profits and financial position. There are some exemptions for smaller or short-term leases to reduce the admin burden.
3. Other changes
   There are also updates to how you measure:
   • Fair value – how you calculate the value of certain assets and liabilities.
   • Uncertain tax positions – how you account for tax estimates when the outcome is uncertain.
   • Business combinations – how you handle the accounting when you buy or merge with another business.
   • Conceptual framework – updating the general principles that guide financial reporting to align with international standards.

4. Earlier change for supplier finance arrangements
   If you use supplier finance (e.g., invoice financing or supply chain finance), the new rules for reporting these arrangements will apply from 1 January 2025.

What this means for you

• Your financial statements might look different, with more assets and liabilities appearing on the balance sheet (especially for leases).
• Revenue may be recognised at different times, which could affect reported profits.
• You may need to update your accounting policies and systems to reflect these changes.

These changes aim to improve transparency and consistency in financial reporting – but they could also increase complexity. If you’re unsure how this affects your business, it’s worth discussing it with your accountant to plan ahead as to how these Financial Reporting Council changes could impact you and your business.