Periodic review of UK GAAP

Chris Smith Date published: Mar 28, 25

In March 2024, the Financial Reporting Council (FRC) issued the amendments from its periodic review of UK GAAP which are effective from 1 January 2026.  The FRC is required to undertake this review every five years and it is designed to ensure that the standards are up to date and reflect the latest developments in corporate reporting.  

Their aim is to provide consistency with International Financial Reporting Standards (IFRSs) while considering whether those requirements are proportionate to the size and complexity of the entities applying FRS 102 and FRS 105.  It also gives stakeholders the opportunity to provide input on any changes recommended. With this in mind, the major changes to FRS 102 and FRS 105 center around revenue recognition and lease accounting. 

Revenue recognition 

IFRS 15, introduced by the IASB in 2018, established a clear five-step model for revenue recognition. The FRC has now integrated this model into FRS 102, aligning UK financial reporting with international standards for greater transparency and reliability.

Entities will need to carefully assess their revenue recognition accounting policies to ensure they are compliant with the new requirements. There could also be potential amendments to the timing of revenue recognition when considering when performance obligations are met.  

Entities will also need to review their customer contracts in detail to apply the guidance and this may not be as simple as it appears at first glance, but lessons can be taken from those companies already applying IFRS 15. 

In addition to understanding how revenue from their customer contracts will need to be accounted for under the new revenue model, companies also should bear in mind the enhanced disclosure requirements related to classes of revenues, how and when revenue has been recognized and unsatisfied performance obligations. 

Lease accounting 

Under IFRS 16, lessees must adopt a new lease accounting model that requires recognizing most leases directly on the balance sheet, except for certain exemptions covering short-term and low-value leases. This change means lessees will now record a right-of-use asset, representing their entitlement to use the leased asset over its term, along with a lease liability, signifying the obligation to make payments. It marks a significant departure from the previous treatment of operating leases, which were typically off-balance sheet items. 

By contrast, under FRS 105, the current lease accounting framework remains unchanged, continuing to classify leases as either operating or finance leases. This divergence highlights the evolving complexity of lease accounting standards and the need for organizations to adapt their processes to meet the demands of IFRS 16 compliance. 

The Periodic Review of UK GAAP underscores the importance of staying aligned with evolving standards like FRS and IFRS, and Ideagen’s solutions are designed to make this process seamless.

With Ideagen Disclose, you can automate and streamline the preparation of financial statements and disclosures, ensuring compliance with precision, speed, and simplicity. For audit management, Ideagen Internal Audit provides a complete, user-friendly system with unlimited audits, empowering you to adapt your processes without the burden of complex modules or hidden costs. Together, these tools offer expert functionality and exceptional user experience, enabling you to meet regulatory requirements efficiently while focusing on what truly matters—adding value to your organization. 

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