The UK games industry continues to evolve at pace - commercially, creatively and technologically. Alongside that growth comes increasing complexity in financial reporting, particularly with the introduction of Revised FRS 102, which substantially aligns UK GAAP revenue recognition with IFRS 15 and its well-known five-step revenue recognition model. 

For games companies, the revised standard brings both opportunity and challenge. While the principles may be familiar, the emphasis on substance over form, the identification of the end customer, and the nature of performance obligations means that revenue recognition can look very different depending on your business model. 

At Johnston Carmichael, we work with games businesses across the full spectrum, from early-stage indie studios releasing their first title to established AAA developers and publishers operating globally, and we see first-hand how these changes play out in practice. 

Why Revised FRS 102 matters for the games sector 

Under Revised FRS 102, companies must carefully assess both the timing and measurement of revenue, with a far greater focus on understanding what is being promised to the customer, who the ultimate end customer actually is, and whether revenue should be recognised gross or net. This assessment is not just a technical exercise. The conclusions reached can have a material impact on reported revenue, audit thresholds, disclosure requirements and, importantly, downstream tax considerations. 

Identifying the end customer: a critical judgement 

A key determinant of the correct accounting treatment is identifying who the end customer is in each transaction and whether the entity is acting as a principal or an agent. In the games industry, the end customer may be a publisher, a platform or the gamer themselves. Determining which of these applies requires an assessment of control, a central concept under Revised FRS 102. 

The standard includes several indicators to support this judgement, such as which party is responsible for fulfilling the performance obligation, who bears inventory or development risk, and who has discretion in setting pricing. For example, where a developer concludes that the platform is the end customer, revenue may be recognised gross, with platform or publisher fees treated as a cost of sales. In contrast, where the developer is acting as an agent, revenue may be recognised net of those fees. Getting this assessment wrong can significantly distort reported revenue and profitability. 

Complex revenue streams require careful analysis 

Modern games businesses rarely rely on a single revenue stream. Initial game sales, downloadable content, micro-transactions, in‑game consumables, virtual currencies and subscription or live‑service models all introduce different performance obligations and recognition patterns. Each contract and revenue stream must be assessed individually under Revised FRS 102, rather than relying on historical treatments or industry convention. 

Technical excellence, delivered with sector insight 

Whether you’re an indie studio scaling rapidly, a mid-tier developer working with multiple publishers, or a AAA business managing complex global arrangements, Revised FRS 102 demands robust technical analysis combined with deep sector understanding. 

At Johnston Carmichael, our specialist games team combines accounting and audit expertise with practical, commercial insight into how games businesses operate. We don’t believe in one-size-fits-all solutions; instead, we work closely with management teams to ensure revenue recognition is technically sound, clearly documented, aligned with commercial reality, and fit for audit, tax and stakeholder scrutiny. 

If you’d like to understand how Revised FRS 102 impacts your studio, or simply want a second pair of expert eyes over your revenue recognition approach, our Innovation Tax team would be delighted to help, whatever stage of the games lifecycle you’re at.