UK GAAP changes: What your business needs to know

What are the key changes?

Revenue recognition – FRS 102 and FRS 105

The revised requirements introduce a more structured approach to recognising revenue, focusing on when control of goods or services transfer to the customer.

Businesses will need to review customer contracts, particularly those involving multiple goods or services, variable consideration, milestones or long-term delivery arrangements. Revenue may need to be recognised earlier or later than under previous accounting policies.

For example, contracts combining equipment, installation and ongoing support may require the total contract price to be allocated across separate performance obligations, with revenue recognised at different points.

Lease accounting – FRS 102 only

Most leases held by lessees will now need to be recognised on the balance sheet through a right-of-use asset and a corresponding lease liability.

This could affect reported assets, liabilities, profit, EBITDA, net assets and banking covenant calculations. Certain exemptions remain available, including for qualifying short-term leases and leases of low-value assets.

These lease changes do not apply to micro-entities preparing accounts under FRS 105.

What could this mean for your business?

The impact goes beyond the year-end accounts. Businesses may need to consider:

• Systems and processes: Updating bookkeeping, revenue schedules, lease records and management reporting.
• Banking covenants: Assessing whether changes to reported financial measures could affect lending agreements.
• Tax implications: Reviewing whether changes in accounting treatment affect tax computations or deferred tax.
• People and resources: Providing additional training, allocating responsibilities and ensuring appropriate review procedures are in place.

Accounts clients may see changes to year-end adjustments, disclosures and information requests, while outsourcing clients may need to update their bookkeeping and reporting processes.

How should you prepare?

Start by reviewing your customer contracts and lease arrangements, identifying where existing accounting treatments may need to change. Assess the potential financial impact,  and ensure your systems and teams are ready to provide the information required.

Planning ahead will help reduce the risk of unexpected adjustments and make the transition to the revised requirements more straightforward.

How Gravita can help

Gravita can help you understand how the changes apply to your business, identify areas requiring attention and plan the necessary updates to your accounting and reporting processes.

If you have not yet assessed the impact, now is the time to act. Contact your usual Gravita adviser to discuss your requirements and the support available. Or please complete our poll here to help us identify how prepared you are and if you’d like us to contact you.

For further background, please read our guide to the FRS 102 changes from January 2026.

This article provides general information and should not be relied upon as advice for your individual circumstances.

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