Financial reporting standard changes effective from 1 January 2026
On 27 March 2024, the Financial Reporting Council (FRC) issued significant amendments to UK Generally Accepted Accounting Practice (GAAP) standards, following its second periodic review. With the amendments coming into effect for financial periods starting on or after 1 January 2026, UK businesses need to consider the impact now.
What is UK GAAP and FRS 102?
UK GAAP refers to the framework of accounting standards and principles used in the UK. FRS 102 is the core standard under UK GAAP for most entities that do not apply full International Financial Reporting Standards (IFRS). It applies to entities that cannot use FRS 105 (for micro-entities) or FRS 102 Section 1A (for small entities).
Originally introduced in 2015, FRS 102 aimed to simplify and modernise financial reporting. With evolving business models and international developments, the FRC has now made significant changes to ensure the standard remains relevant.
Key updates to FRS 102
The FRC’s latest amendments are based on proposals outlined in FRED 82 and FRED 84, with the goal of enhancing comparability and transparency across UK entities. The most impactful changes relate to:
- Revenue recognition – adopting a revised five-step model
- Lease accounting – introducing an ‘on-balance sheet’ model
Revenue recognition
Section 23 of FRS 102 has been revised to adopt a five-step model for revenue recognition, largely aligned with IFRS 15. This represents a significant shift away from the older risk-and-reward approach.
Revenue will now be recognised when control of goods or services is transferred to the customer, not simply when risks and rewards change hands.
The five steps are:
- Identify the contract
- Identify performance obligations
- Determine the transaction price
- Allocate the price to performance obligations
- Recognise revenue as obligations are fulfilled
For a deeper look on the new model, please see our article on the new five-step model for revenue recognition.
We’re here to help
Our team can help you manage the transition with:
- Impact assessments – modelling effects on revenue, leases, and financial KPIs
- Workshops and training for finance and operations teams
- Policy and disclosure updates – tailored to your contracts and internal processes
- System and process review – to ensure ongoing compliance
- Preparation of technical accounting papers and modelling tools
We can also support you with:
- Understanding how UK GAAP changes impact your financial reporting
- Adapting accounting policies and internal processes
- Managing stakeholder communications
- Delivering audit-readiness under the new requirements
- Understanding the tax impact of the accounting changes
If you would like more information on the GAAP changes and how we can help you, please get in touch with a member of our specialist team via the form below.
