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FRC updates FRS 102 – UK GAAP is changing

28 Mar 2024

On the 27th March 2024 the FRC published the latest version of FRS 102, following the results of its periodic review. There are few surprises in the document and the proposals in FRED 82 have largely all been included in the new standard.


The new standard is effective for most requirements for periods beginning on or after 1 January 2026, with early adoption permitted. The only exception to this is in respect of new disclosure requirements for the cash flow about supplier finance arrangements, and these are effective for periods commencing on or after 1 January 2025.

For most changes transitional requirements are included in the standard to ensure the first year of implementation is as painless as possible.

So what are the key changes?

Operating leases are now on the balance sheet

As has been discussed before, the standard requires operating leases to be on the balance sheet. To achieve this, a “right of use” asset and “lease liability” are added to the balance sheet on the basis of the present value of the remaining lease payments. The asset is then depreciated over the life of the lease, while the liability is paid off over the lease term and interest charged to the profit and loss.

Short term leases (less than 12 months) are not treated this way, and low value assets can be excluded as well. There is no monetary value in FRS 102 to define “low value” but further guidance is expected. However, it is worth noting that the value is based on the asset, not on the amount of the lease, and the nature of the asset is also a factor. In fact, the standard confirms that the following assets are never “low value”:

  • cars, vans, buses, coaches, trams, trucks and lorries;
  • cranes, excavators, loaders and bulldozers;
  • telehandlers and forklifts;
  • tractors, harvesters and related attachments;
  • boats and ships;
  • railway rolling stock;
  • aircraft and aero engines;
  • land and buildings; and
  • production line equipment.

Of course there are further complications concerning dilapidation costs, lease incentives and working out the lease term but these will be explored on future 20:20 Innovation courses.

Suffice to say these changes will take some time to implement for many companies and may impact on bank covenants and even the size / audit status of companies as this will increase the gross assets of the company.

Note that this change does not impact on lessors and is not included in FRS 105. So given the limits for micro entities are about to go up significantly, one wonders if FRS 105 suddenly becomes a very tempting option.


A five-step model for revenue recognition for all contracts with customers has been brought in, based on identifying the distinct goods or services promised and the consideration expected. This is consistent with IFRS 16 and will also impact on FRS 105.

While companies should spend some time considering the implications of this for their accounts, it is thought that many companies will not face a change of accounting policy.

Small Companies (Section 1A)

The amendments to this section do not change the accounting for small companies, but change the disclosure exemptions they are able to take. While Going Concern remains an “encouraged” disclosure, extra disclosure has been added for small companies in the following areas:

  • Deferred and current tax
  • Lease details
  • Disclosure relating to provisions and contingencies
  • Dividends declared and paid or payable in the period
  • Full related party disclosures per Section 33

While most of the above issues will not be particularly sensitive, the addition of full Section 33 disclosure will no doubt raise some objections from companies and could be a further reason to look at FRS 105 which only has the requirement to disclose advances and repayments to director per s413 of the Companies Act.


While we have quite a long time before these changes take effect, firms would do well to start to consider those clients that should be introduced to FRS 105, those that will not have an issue and those that will be significantly impacted. The firm can then focus on those where there is likely to be a significant impact and work with them to prepare the information needed for the accounts.

Details about the new standard can be found here: https://www.frc.org.uk/news-and-events/news/2024/03/frc-revises-uk-and-ireland-accounting-standards/