The Financial Reporting Council’s (FRC) recent amendments to Financial Reporting Standard (FRS) 102 mark a decisive move towards aligning UK Generally Accepted Accounting Practice (GAAP) with international standards. Companies across various sectors, including software, construction and professional services – will face significant changes in the way they recognise revenue and account for leases.

As these amendments take hold from January 2026, many UK businesses may find that their legacy accounting systems no longer support the detailed, integrated reporting required under the new FRS 102 framework.

This is where a move to a more sophisticated Enterprise Resource Planning (ERP) solution becomes a significant strategic decision.

Why businesses need more sophisticated ERP technology

Under the new FRS 102 rules companies must follow a five‐step approach to revenue recognition and bring a wider range of lease arrangements onto the balance sheet. For businesses with complex revenue streams – such as multi-element contracts or long-term service agreements - these changes demand a significantly increased level of detail and accuracy in financial reporting, including:

• Complex revenue recognition: new standards require companies to identify performance obligations within customer contracts and allocate transaction prices accordingly. This process is often labour-intensive when using traditional accounting software and spreadsheets.
• On-balance sheet lease requirements: operating leases must now be treated as both assets and liabilities on the balance sheet. This not only alters key financial metrics, such as leverage and EBITDA, but also demands real-time tracking and detailed disclosure.
• Enhanced disclosure and reporting: the revised FRS 102 mandates more granular disclosures. Companies need systems that can consolidate data across multiple business units or entities, facilitate intercompany eliminations and handle multi-currency reporting seamlessly.

Fast-growing companies with increasingly complex operations are likely to find these new requirements will exceed the capabilities of their current solutions.

This is where a robust ERP solution becomes not just an option but a necessity.

Key steps for a successful ERP implementation under FRS 102

When the decision is made to move towards a sophisticated ERP solution, careful planning and systematic implementation are critical.

Companies should consider the following steps:

1. Assess current systems

Begin by evaluating your current systems and processes. Identify where legacy software falls short in handling the new FRS 102 requirements, particularly around revenue recognition and lease accounting. This review should involve finance, IT and operational stakeholders to build a complete picture of existing data flows and potential gaps.

2. Define objectives and scope

Establish clear objectives for the ERP implementation. Determine which functionalities are essential – such as revenue automation, real-time lease management and multi-entity consolidation – and create a project roadmap. A well-defined scope ensures that the implementation remains focused on compliance as well as broader operational improvements.

3. Data migration and integration

One of the most challenging aspects of ERP implementation is data migration. It is essential to clean and transfer historical data accurately, particularly for items such as long-term contracts, revenue schedules and lease details. Integration with other business systems (e.g., CRM, HR, procurement) must also be planned for to enable consolidated reporting and reduced manual interventions.

4. Pilot testing and phased rollout

A pilot phase enables the organisation to test critical functionalities in a limited setting. Feedback from this phase can reveal unforeseen issues and inform adjustments prior to a full-scale rollout. This staged approach minimises disruption to day-to-day operations and ensures that all user groups have adequate time to adapt to the new processes.

5. Change management and training

Transitioning to an ERP system is as much about people as it is about technology. Developing a comprehensive change management strategy - including detailed communications, training and post go-live support plans – will help to embed the new system within the organisation. Engaging staff at all levels early in the process will foster a culture of ownership and enable smoother adaptation.

Best practices for a successful ERP transformation

In our experience, the following best practices are recommended for a successful ERP transformation.

Engage specialist advisors

Working with experienced consultants can greatly enhance the ERP implementation process. At RSM UK, our specialised teams have deep expertise in both UK GAAP and international standards. Our advisory services ensure that your project is tailored to address your unique financial reporting challenges and opportunities.

Adopt a cross-functional approach

Establish a project team that includes representatives from finance, IT, operations and other key departments. This collaborative approach ensures that all business needs are considered and that the final ERP solution integrates seamlessly across the organisation.

Prioritise data integrity

The impact of an ERP system is directly proportional to the quality of the underlying data. Rigorous data cleansing and validation processes must be established prior to migration. High-quality data not only supports compliance but also enhances the overall reliability of financial reporting post-implementation.

Plan for continuous improvement

An ERP system is not a one-off installation but a long term platform that must evolve with regulatory changes and business growth. Set up a framework for regular review and system upgrades, supported by ongoing training and performance monitoring. This proactive approach ensures that the system remains fit-for-purpose in the face of future changes.

Preparing for FRS102 changes with us

For organisations in the software, construction and professional services sectors, the implications of FRS 102 are profound. Enhanced revenue recognition and on-balance sheet lease reporting necessitate a rethink of existing financial infrastructures. Upgrading to an ERP system is not merely about regulatory compliance – it is an investment in improved efficiency, enhanced reporting accuracy and greater strategic agility.

We are well-equipped to support your journey. Our experienced team offers comprehensive services from initial impact assessments and system planning to full implementation support and post go-live optimisation. With deep expertise in UK GAAP and international financial reporting standards, we can help tailor an ERP solution that meets your business’s unique requirements and positions you for long-term success.

To learn more about how we can assist in your transition to a modern ERP system under the new FRS 102 framework, please contact us. Our experts are ready to provide guidance and support, ensuring that your business not only meets today’s compliance challenges but is well-prepared for the future of financial reporting.