The majority of FRS 102 amendments will take effect for accounting periods starting on or after 1 January 2026. As implementation nears, Richard and Jenny  set out the key issues raised by finance leaders from two recent round tables, as well as some practical action points to ease the pain.

Finance leaders are preparing for significant changes in lease accounting and revenue recognition – and the knock-on impact on governance, systems and reporting. Through two focused roundtables – one in the Midlands and one in the South – we gathered insights from CFOs, finance managers and accounting professionals.

We found that, despite awareness, readiness remains uneven. Three main pressure points stand out: data completeness, systems alignment and resource bandwidth. We’ve distilled those discussions here into actionable strategies and key themes to help you navigate the transition confidently.

Lease Accounting Tackling Complexity and Communicating Impact

Revenue Recognition: Aligning Multiplicity with Materiality

Stakeholder Management: Aligning Internally, Communicating Externally

Systems Data and Digitalisation Future-Proofing Finance Functions

Governance and Group Strategy Scaling with Confidence

Lease accounting

Completeness, complexity and communication

The key challenges identified by participants around lease accounting included the following:

  • Participants were concerned about incomplete lease data, especially in large organisations with multiple entities, jurisdictions and acquisitions
  • Many shared issues in identifying embedded leases within customer contracts and rolling lease arrangements where extension terms are unclear at inception
  • As the change to leases will increase EBITDA and net debt, it will directly impact an important performance metric, with participants unsure how to communicate this to wider stakeholders
  • There was uncertainty around what discount rate to select when approaching the changes and how to manage periodic updates to the discount rate used in lease workings

Strategic actions identified from participant discussions

  • Get to lease initiation ensure stakeholders who purchase know what a lease is and have a name to work with in finance
  • Conduct a comprehensive review of all lease agreements to confirm completeness and accuracy of data required for financial disclosures
  • Select a tool that’s fit for your purpose and reporting needs
  • Implement robust controls and documentation processes to support audit trails and compliance with the new FRS 102 requirements
  • Decide on whether to place in Financial Reporting or Marginal Revenue monthly meetings
  • Collaborate with cross-functional teams (eg, procurement, legal, operations) to identify embedded leases and ensure proper classification
  • Clearly communicate the accounting changes and their implications on EBITDA and other key financial metrics to your stakeholders
  • Engage with internal and external stakeholders – including investors, analysts and executive leadership – to align expectations and avoid misinterpretation of performance shifts
  • Update financial models and guidance to reflect the adjusted EBITDA figures post-implementation
  • Reassess financial KPIs and covenant calculations to incorporate the impact of right-of-use assets and lease liabilities
  • Adjust internal performance dashboards and reporting frameworks to reflect the new balance sheet structure and its influence on return metrics
  • Train finance and business unit leaders on interpreting the revised metrics to support strategic decision-making and resource allocation

As a general point, there appears to be a gap in considering the end-to-end business process from inception through financial accounting and into management reporting. For example, with leases, the focus often centres on technical accounting and selecting a lease tool to manage data, rather than assessing the broader impact on multiple teams and processes before and after implementation.

Revenue recognition

Matching multiplicity and materiality

Revenue recognition challenges were particularly acute for organisations with:

  • construction contracts requiring early comparison between current and amended recognition models
  • service charge income where billing mismatches create monthly variation – though not material, it complicates reporting
  • retainer revenue and insurance commissions, where straight-line recognition may be affected
  • documentation and reconciliation of current practices with the new model was identified by participants (the five-step model was seen as a useful structure but requires careful implementation across diverse revenue types).

Strategic actions identified from participant discussions

  • Perform a comprehensive inventory of all revenue streams in the business, mapping each stream to the five-step revenue recognition model to ensure alignment with the new Section 23 Revenue in FRS 102
  • Highlight areas where legacy recognition practices diverge from the new model, particularly in timing and matching principles
  • Develop templates and checklists to guide business units through the five-step model, ensuring consistent application across diverse revenue types
  • Schedule periodic reviews to validate ongoing compliance and update documentation as business models evolve
  • Train finance, commercial and operational teams on the practical application of the five-step model, using real-world examples from the organisation’s revenue streams
  • Communicate the rationale behind timing adjustments and matching principles to senior stakeholders to support informed decision-making and performance interpretation
  • Integrate revenue recognition checkpoints into contract review and billing processes to catch issues early and reduce downstream reporting complexity

Action point

Map all revenue streams to the five-step model and identify areas where matching principles or timing adjustments are needed.

Stakeholder management

Internal alignment and external communication

Participants stressed the importance of communicating changes to stakeholders, from internal teams to regulators and lenders. Key concerns included:

  • whether banks and lenders are aware of the changes and their impact on covenants
  • how to explain lease accounting changes to non-financial stakeholders
  • managing exit strategies and acquisitions where lease data is incomplete.

We introduced a CFO Scorecard to help finance leaders assess readiness across six dimensions:

CFO agenda scorecard

A strategic framework for finance leaders

Value creation

Driving sustainable growth through strategic investment and innovation.

Stakeholder management

Building trust and alignment across internal and external stakeholders.

Business protection

Safeguarding assets, ensuring compliance, and managing risk effectively.

Operational delivery

Optimising processes and resources to achieve financial and operational goals. 

Action point

Use the CFO Scorecard to benchmark readiness and develop a stakeholder communication plan tailored to each audience.

Systems, data and digitalisation

Preparing for the future

Participants showed a clear interest in understanding:

  • what systems are currently used to ensure Companies House compliance
  • how to prepare for the digitalisation of filings starting April 2027
  • whether existing systems can support the new lease and revenue models and the need to assess business systems and data flows, ensuring they can support the new accounting requirements and future digital reporting mandates.

Action point

Review current systems for compatibility with FRS 102 changes and begin planning for digital filing requirements.

Governance and group strategy

Scaling with confidence

As several groups expand through acquisitions, there’s a growing need to:

  • strengthen group governance
  • ensure consistent application of accounting policies across entities
  • address challenges in integrating newly acquired entities with limited lease data.

Action point

Develop a governance framework that supports consistent lease and revenue recognition across the group.

Top takeaways from both roundtables

1.

Understand the impact

Map the amendments to your business model, contracts, and reporting metrics

2.

Ensure data completeness

Audit leases and revenue streams for accuracy and completeness

3.

Communicate early and clearly

Engage stakeholders with tailored messaging to manage expectations and support change

4.

Prepare systems and teams

Align technology, processes and skills with the new requirements

5.

Use strategic tools

Apply frameworks like the CFO Scorecard to guide implementation and readiness

Strategic reset: Reframing financial reporting under FRS 102

The FRS 102 amendments represent a substantive shift in UK financial reporting, aligning domestic standards more closely with international frameworks. The revised lease and revenue recognition models introduce a principles-based approach that enhances transparency but requires greater judgement and documentation.

On-balance-sheet lease recognition will affect key financial ratios and stakeholder perceptions, particularly in asset-intensive sectors. Similarly, the new revenue model demands precise assessment of control transfer, impacting deal structuring and timing.

These changes offer an opportunity to modernise financial reporting, improve data governance and strengthen stakeholder confidence. Businesses that approach implementation strategically will be better positioned to navigate complexity and enhance financial clarity.

By acting early, auditing thoroughly and communicating clearly, finance leaders can turn regulatory change into a catalyst for better governance, stronger reporting and smarter decision-making.

businessman using digital tablet on office desk

Our FRS 102 hub is here to support you

Get key information on the changes, insights and details of our Implementation Toolkits to help you navigate the changes and support your implementation journey

    For more insight and guidance, contact our experts:

    Pinkesh Patel
    Pinkesh Patel
    Partner
    Reading, Thames Valley, Oxford
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    Sarah Hughes
    Sarah Hughes
    Partner
    London
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    Richard Olney's headshot
    Richard Olney
    Director
    Birmingham
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    Jennifer Ilsley - headshot
    Jennifer Ilsley
    Director
    Reading
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    Ashleigh Ryninks
    Ashleigh Ryninks
    Director
    London
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    Casper H Kaars Sijpesteijn
    Casper H Kaars Sijpesteijn
    Consultant
    Leeds, London, Manchester
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