Major amendments to the set of rules and standards for financial reporting for businesses in the UK come into force from 1 January 2026.
These include changes to the reporting of lease agreements and how revenue is accounted for under FRS 102, FRS 102 Section 1A, and FRS 105.
What is changing?
Generally, business reporting will move closer to international accounting standards with these changes.
Under the revised rules, the distinction between operating and finance leases has been removed, meaning most leases will now need to go on the balance sheet, even if you will not own the asset at the end of the lease term. The Financial Reporting Standards include simplifications to keep the process manageable for SMEs.
Planning
The new approach will require early thought and preparation as it will impact financial statements, ratios, covenants, and may affect company size thresholds.
If your business has a large number of leases, complex contracts or loan covenants to consider, contact us to review your position.