Key changes to FRS 102: what you need to know

FRS 102, the financial reporting standard for UK businesses not using IFRS or the micro-entities regime, has undergone its most significant update yet - the Periodic Review 2024. The changes take effect for accounting periods beginning 1 January, with some exemptions available from retrospective application.

How could this impact your business?

The FRS 102 changes could affect key performance metrics like EBITDA, net debt, and gearing ratios, impacting financial assessments. Compliance with loan covenants and finance negotiations may also be influenced.

Businesses involved in acquisitions should review earn-out calculations, while changes to financial reporting could affect employee bonus and share schemes. The availability of distributable profits may also shift, impacting dividend payments.

Finally, companies should prepare for adjustments to budgeting and forecasting processes to align with the new reporting framework. 

Steps to prepare

To manage the transition smoothly, businesses should set a clear timeline, assess staff training needs, and gather financial data early. Reviewing and updating accounting policies, key estimates, and judgements will be essential to ensure compliance.

Companies should also check whether software updates are needed, adapt management reporting and internal controls, and plan for any tax implications. Agreeing on an audit and accounts preparation timetable, understanding the new company size thresholds (effective 6 April 2025), and budgeting for additional implementation costs will help ensure a smooth transition.

Early preparation is key to minimising disruption.

How we can help

We provide expert support to ensure a smooth transition while keeping you compliant.

Impact assessment report

Using our bespoke tool, we’ll identify how the changes affect your business, highlight available accounting policy choices, and outline additional disclosure requirements in your financial statements.

Revenue recognition support

We’ll analyse your contracts to assess any revenue recognition changes, determine new balances that need to be recognised, and calculate the impact at the transition date and retrospectively if elected.

Lease accounting guidance

Our team can review your lease contracts to assess capitalisation requirements and evaluate key inputs such as lease term and discount rates. We’ll also calculate lease balances at transition and provide ongoing support to maintain these calculations for future reporting periods.

Financial statement disclosures

We’ll prepare the required disclosures for your financial statements, ensuring compliance with the updated reporting framework.

Tailored staff training

Our training sessions will equip your team with the knowledge to apply the changes effectively, helping to streamline the transition process.

Ad-hoc advisory and review

Whether you need guidance on specific transactions, accounting policy papers, or a review of your workings, we offer expert advice tailored to your business needs.

Tax impact assessment

Our tax team can assess the impact on current and deferred tax, including guidance on the new rules for uncertain tax treatments.

Next steps

The FRS 102 changes are significant - but with the right planning, you can stay ahead. Our experts have created a downloadable document which goes into further detail. You can also find out how this will impact businesses working in specific industries here.

Please contact a member of our team if you would like to find out more.