Changes to FRS 102: Revenue Recognition and Lease Accounting

From 1 January 2026, significant changes to FRS 102 will come into effect — particularly around revenue recognition and lease accounting, bringing the standard more in line with IFRS 15 and IFRS 16.

From a revenue perspective, the introduction of the five-step model may change how and when revenue is recognised.
Businesses will need to identify distinct performance obligations within contracts, allocate the transaction price accordingly, and recognise revenue as those obligations are satisfied — either over time or at a point in time.

From a lease accounting perspective, most leases will now be brought onto the balance sheet.
This means recognising a lease liability alongside a corresponding right-of-use asset.

As a result, rental expenses in the P&L will be replaced by depreciation on the asset and interest on the liability.