The upcoming changes to FRS 102, which include a new revenue recognition model and the introduction of on-balance sheet accounting for significant leases, will come into effect on 1 January 2026. What should your business be doing this year to prepare for change?

Project planning

To ensure your business is prepared for the changes in UK GAAP, it’s important to start early. We recommend creating a project plan that includes:

• Training your team on the upcoming changes.
• Assigning responsibilities.
• Establishing clear deadlines.
• Communication with key stakeholders.

GAAP impact assessment

A comprehensive GAAP analysis should be conducted to identify how each line item in your financial statements is affected by the amendments. This analysis should include:

• Assessment of potential GAAP adjustments for each line item.
• Key actions required to quantify GAAP adjustments.
• Contract analysis for each of your revenue streams to evaluate the application of the new revenue recognition model.
• Determining how to adopt the revenue amendments, either by revising your comparatives or applying the model only to incomplete contracts as of the adoption date.

Leases

Having identified any leases that need to be brought on balance sheet, lease documentation will need to be collated and analysed, including:

• Reviewing contracts to determine whether they contain a lease.
• Determining the discount rate methodology.
• Using specialist software or spreadsheets to calculate your lease liabilities, right-of-use assets and associated expenses.

Processes and controls

Processes and controls will need to be established to ensure:

• Revenue is recognised and measured in line with the revised model on an ongoing basis.
• Accounting policy manuals are up to date.
• Accounting systems are upgraded or modified.

Are there broader business implications?

The amendments may have broader implications for your business, including:

• KPIs.
• Covenant compliance.
• Earn-out agreements.
• Profit-related remuneration.
• Tax payments.
• Ability to pay dividends.

The wider business implications should be identified, along with the steps to manage the impact, such as renegotiating covenants or updating relevant agreements/contracts.

We strongly recommend early preparation to ensure that your business is ready for the changes in UK GAAP. We would like to understand how ready you are for the amendments and how you think they will impact your business.

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How we can help you prepare for the changes

Our team of accounting and financial reporting experts are here to support your business with the changes, including:

• Workshops to help your people understand the changes.
• GAAP impact assessments to help your team identify and understand the amendments, quantify the changes and explain the impact to your key stakeholders.
• Detailed revenue or lease analysis.
• Accounting papers and policies to apply the new standard to your business.
• Financial statement preparation, incorporating the new disclosure requirements.

Please get in touch with Danielle Stewart OBE, Andy Ka, or your usual RSM contact to discuss how we can help your business prepare for the changes to UK GAAP.