For accounting periods beginning on or after 1 January 2026, the recent changes to UK GAAP will affect how many businesses prepare their financial statements.
If you’re a small entity reporting under FRS 102 Section 1A, this goes beyond new accounting rules too. More information, stronger processes and better documentation could all be needed.
We’ve broken down the key changes, why they’re being introduced and what you should be doing now below.
Why is FRS 102 Section 1A changing?
Section 1A is designed to give small entities a simpler reporting framework, particularly when it comes to presentation and disclosures.
The latest amendments bring greater clarity over the information small entities are expected to provide, with several disclosures that were previously encouraged now becoming mandatory.
The aim? Greater consistency between financial statements while continuing to ensure they provide a true and fair view.
FRS 102: What’s changing?
- Increased mandatory disclosures on revenue recognition, leases, going concern, related party transactions, tax, dividends, and share-based payments.
- Reporting may include additional statements such as Statement of Total Comprehensive Income, Changes in Equity, or Income and Retained Earnings.
- Focus on clearer, more detailed disclosures rather than just accounting treatment changes.
- Mandatory requirements for related party transactions to be disclosed in accordance with paragraphs 33.9 and 33.14.
- The new revenue recognition model (more on that below) may require businesses to provide more information about their performance obligations.
- Lease disclosures increase due to on-balance sheet lease accounting, requiring detailed information about arrangements, exemptions, and assets.
- Greater emphasis on going concern assessments, including the evidence supporting management’s judgements.
FRS 102: New revenue recognition requirements
In one of the more significant changes to FRS 102, the new revenue recognition requirements introduce a five-step model. For businesses with straightforward transactions, the ultimate timing of revenue recognition may not change significantly. But businesses will still need to work through the new requirements and document their conclusions.
Businesses with more complex customer arrangements may need to look more closely at individual contracts, particularly where they contain multiple deliverables, variable consideration, discounts, rebates, contract modifications or services delivered over time.
Why do these changes matter?
Some of the information required may not currently sit within your finance system. If that’s the case, customer contracts, lease agreements, related party information and evidence supporting key management judgements may have to be gathered from across the business.
A gentle but important heads up: waiting until year end could make this much harder. On the flipside, conducting a gap analysis now can identify where accounting policies, systems, processes and disclosures need to change before the new requirements apply.
What happens if you don’t act?
Leaving preparations too late could result in year-end delays, unexpected accounting adjustments and additional audit queries or costs. More importantly, insufficient information or documentation could mean financial statements require late changes to comply with UK GAAP and applicable legal requirements.
How can Cooper Parry help?
If you’re wondering how the FRS 102 changes will impact your business, we can help you get ahead of them and move forward in compliant, confident fashion. That includes:
- FRS 102 impact and gap assessments
- Revenue and lease accounting assessments
- Disclosure and financial statement reviews
- Practical training for finance teams
As with previous changes to UK GAAP, the earlier you understand the impact, the easier the transition will be. Get in touch.
