Navigating the upcoming FRS 102 changes

The two main FRS 102 changes are to revenue recognition and lease accounting. These include how and when revenue is recorded and for leases, it will bring most onto the balance sheet.

The new rules are designed to provide greater consistency and transparency across financial reporting.

Firstly, it’s important understanding how the new rules apply to your contracts, leases, and business model. FRS 102 changes will impact each business differently. Assess what data you’ll need, review your systems and processes, and identify where the biggest impacts will be. This is why early preparation is vital as it helps avoid last‑minute pressure.

An FRS 102 transition plan helps you map out what needs to change, when it needs to happen, and who is responsible. It reduces risk, supports smoother implementation, and ensures you’re ready for the new reporting requirements.

A strong FRS 102 transition plan should include:

• A clear timeline for adoption.
• An assessment of revenue streams and lease portfolios.
• Data and system changes required.
• Roles and responsibilities.
• Training needs for your team.
• A communication plan for internal and external stakeholders.

Getting FRS 102 wrong can lead to several issues, both financial and operational. The most common are:

• Incorrect financial statements, which can affect decision‑making and stakeholder confidence.
• Audit challenges, including additional scrutiny, delays, or required restatements.
• Compliance risks, particularly if errors are material.
• Unexpected tax implications, depending on how revenue or leases are recorded.
• Reputational impact, especially for organisations that rely on external reporting or funding.
• Increased costs, as fixing errors later is usually more time‑consuming and expensive than preparing correctly from the start.