Are you ready for the updates to UK GAAP?

May 24, 2024

FCA, Audit Partner
West London


Are you ready for the updates to UK GAAP?

On 27 March 2024, the Financial Reporting Council (FRC) issued Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024, concluding its second periodic review of the financial reporting standards.

The effective date for most amendments is periods beginning on or after 1 January 2026, with early adoption permitted.

What are the major changes?

  • A new model for revenue recognition, aligned to IFRS 15: Revenue from Contracts with Customers, but with some simplifications; and
  • On balance sheet lease accounting for lessees, aligned to IFRS 16: Leases, but with certain practical exemptions.

What other amendments are taking place?

  • greater clarity for UK small entities applying Section 1A, regarding which disclosures need to be provided in order to give a true and fair view;
  • revisions to Section 2 Concepts and Pervasive Principles to align with the IASB’s Conceptual Framework for Financial Reporting;
  • a new Section 2A Fair Value Measurement, updated to reflect the principles of international standards, replacing the Appendix to Section 2;
  • revisions to Section 7 Statement of Cash Flows, to include new disclosures for supplier finance arrangements that promote consistency with IFRS (this is to be implemented for periods commencing on or after 1 January 2025);
  • additional guidance in Section 26 Share-Based Payments for specific situations, such as equity instruments issued as part of a business combination; and
  • additional guidance in Section 29 Income Tax on uncertain tax positions.

I thought that FRED 82 was looking at other areas to align with IFRS?

  • The suggested alignments with IFRS 9 regarding expected credit loss model of financial asset impairment and IFRS17 regarding Insurance Contracts, as suggested with FRED82 have not been implemented.

Historical context

FRS102 was originally published in March 2013 and The FRC are bound to undertake reviews of FRS102 at least every five years.  The first periodic review, the Triennial Review 2017, was completed in December 2017, with an effective date of 1 January 2019.

This update follows on from the consultancy document Financial Reporting Exposure Draft (FRED) 82, which was published in December 2022 for comment.  The deadline for feedback on the proposed changes was 30 April 2023.  The FRC have then spent close to a year reviewing the comments and a number of them appear to have been taken on board, in that the changes in some areas are quite different to the original proposals under FRED 82.

That’s great, but what are these major changes and how will they affect my business?

Revenue recognition:

  • Based on IFRS 15 Revenue from Contracts with Customers: utilising the Five-step revenue recognition model.
  • Entities will need to review revenue contracts and apply the five-step model potentially impacting timing of revenue recognition.
  • Likely to most impact businesses where sales contracts include multiple performance obligations. For example, where sale of goods are made with a service contract or warranty attached, sales of software with multiple deliverable points or bundled contracts which include differing revenue streams. In these instances, the timing and profile of revenue recognition may change.
  • TRANSITIONAL ARRANGEMENTS – Option to either: (1) restate comparatives, or; (2) not restate comparatives and any cumulative effect of initially applying the standard is recorded as an adjustment to opening retained earnings.


  • Based on IFRS 16 Leases: on-balance sheet lease accounting for lessees, as a right of use (RoU) asset and a corresponding lease liability.
  • Lease expenses will be presented as depreciation and interest in the profit and loss account.
  • This will impact key metrics such as EBITDA, leverage ratios, debt covenants and potentially tax liabilities.
  • This could also change a company’s reporting requirements, as it will increase the gross assets declared in their financial statements.
  • Exemptions will be available for short-term leases and low-value leased assets.
  • TRANSITIONAL ARRANGEMENTS – There is no need to restate comparatives. The asset will be recognised as equal to the liability on transition (unless there are group reporting issues).  Any cumulative effect of initially applying the standard is recorded as an adjustment to opening retained earnings.

I think that these may affect my business – what should I do?

Please contact your usual Barnes Roffe contact or Mark Hancock in the Uxbridge office.  We can review the company’s position, determine the effects of the changes and help you plan for the future.

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