FRS 102 changes and how these impact accountants
For accounting periods commencing on or after 1 January 2026, the FRS 102 changes are now in force, but some clients won't notice until next year.
·3 min read
For accounting periods commencing on or after 1 January 2026, the FRS 102 amendments are now in force, even though many clients will not feel the impact of them until their next year end rolls around.
The changes come out of the Financial Reporting Council’s Periodic Review 2024. They’re wide-ranging, but two areas will do most of the heavy lifting in practice: revenue recognition and lease accounting.
This is the moment to get ahead. Not with a 40-page memo that nobody reads, but with practical decisions about where figures in their accounts might move, what evidence you will need, and how you will keep the process reviewable.
What has changed, and when it bites
The effective date is simple to say and easy to misapply. The amendments apply to periods that start on or after 1 January 2026, not “accounts signed in 2026”. A company with a 31 March year end will typically have its first mandatory application of the new rules in the year beginning 1 April 2026. A 31 December year end is in it immediately, from 1 January 2026.
Early adoption is permitted in many cases, but for most firms, the realistic job is preparing for the first mandatory year and getting comparatives and opening adjustments right.
Revenue recognition will need more judgement
FRS 102’s revenue section has been replaced with a model based on a simplified version of IFRS 15. The core idea is that revenue is recognised when an entity transfers promised goods or services to a customer, assessed through performance obligations within the contract.
In practice, the impact tends to show up in a few familiar places:
Contracts that bundle items, for example, supply plus installation, or delivery plus ongoing support. You may need to split the contract into separate obligations and recognise revenue at different points.
Variable consideration, for example, rebates, penalties, performance bonuses, and retrospective price adjustments. Clients often treat these as “we’ll sort it later”. The new model pushes for a more disciplined estimate and constraint.
Longer-term arrangements. Some revenue that was recognised at a point in time may move to recognition over time, or vice versa, depending on what the customer is receiving and when.
For accountants, this is about improving fact-finding. You’ll need better contract summaries, clearer evidence trails, and a standard set of questions that juniors can apply consistently.
Transition, disclosures, and the knock-on effects
Transition choices matter because they affect comparatives, opening reserves, and how explainable the movement is to directors.
Tom Herbert, in his article on the changes, noted two implementation routes commonly discussed in practice, restating comparatives or adjusting opening retained earnings at the start of the first application period.
Even where the cash tax does not change immediately, changes in the timing of profits can affect planning discussions, including distributable reserves and director expectations. If the accounts show a dip because revenue moved or lease costs are presented differently, you’ll be doing more explaining, and probably at the worst time, three days before sign-off.
What to do now
Start with triage. Identify which clients have contracts or leases likely to move the numbers, then prioritise those with banking covenants, investor reporting, or regular dividends.
Next, standardise your evidence. Build a short contract and lease fact-find that captures what you need for the new model, and make it part of your usual year-end request list. If you don’t ask, clients will not volunteer it, and you’ll be guessing.
Finally, make the process repeatable. The first year will be slower, but it does not have to be chaotic if you can track decisions, document judgements, and keep a clean review trail.
How Bright can help you keep the change manageable
You need a reliable way to capture inputs, apply consistent treatments, and produce accounts with an audit-friendly trail of how you got there.
Bright’s cloud accounts production tool, BrightAccounts
If you want to approach the FRS 102 transition with less spreadsheet chasing and more structured review, it’s a sensible place to start.
This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.
Topics:
Talk to our team
See how Bright can help your practice.
