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
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
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.
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
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.
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.
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
Understand the impact
Map the amendments to your business model, contracts, and reporting metrics
Ensure data completeness
Audit leases and revenue streams for accuracy and completeness
Communicate early and clearly
Engage stakeholders with tailored messaging to manage expectations and support change
Prepare systems and teams
Align technology, processes and skills with the new requirements
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.
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
