The Change Nobody Is Talking About
The profession has spent 2026 talking about quarterly updates. Understandably so. But while attention has been on Making Tax Digital, the biggest overhaul of UK GAAP in more than a decade has quietly gone live, and for many practices it will land squarely in the middle of the next accounts production season.
The September 2024 edition of FRS 102, produced by the Financial Reporting Council's Periodic Review 2024, applies to accounting periods beginning on or after January 1st 2026. That means a client with a December 31st 2026 year end is already eight months into their first period under the new rules. A client with a March 31st 2027 year end started in April. The accounts you draft next spring will be the first to carry the changes, and the decisions that determine whether those accounts are straightforward or painful are being made right now, inside client bookkeeping records you may not have looked at yet.
What Has Actually Changed
There are three areas that will affect the largest number of clients on your list.
- Leases (Section 20). Section 20 has been substantially rewritten. The old lessee distinction between operating and finance leases has gone. Lessees now recognise a right of use asset and a corresponding lease liability for most leases, bringing property rentals, vehicles, plant and equipment onto the balance sheet. There are exemptions for short term leases of twelve months or less and for leases of low value assets, which can continue to be recognised on a basis similar to the old operating lease treatment.
- Revenue (Section 23). Revenue recognition moves to a five step model built on the same principles as IFRS 15: identify the contract, identify the performance obligations, determine the transaction price, allocate that price to the obligations, and recognise revenue as each obligation is satisfied. For most simple trading clients the numbers will not move. For clients with bundled goods and services, staged contracts, subscriptions, licences, retentions or variable consideration, they very well might.
- Small entities (Section 1A). Do not assume small companies escape. Section 1A has been updated with expanded disclosure expectations, including additional requirements linked to leases, revenue, share based payment and taxation. Related party disclosure has been recast so that a UK small entity applies the requirements in paragraphs 33.9 and 33.14, without the key management personnel compensation disclosure in paragraph 33.7.
There are further changes in the same review covering cash flow statements, financial instruments, business combinations and income tax. They will hit fewer clients, but they are worth a technical read before you sign anything off.
Transition: Simpler Than You Fear, Tighter Than You Think
The good news is that the FRC has kept lease transition relatively pragmatic. Lessees apply a modified retrospective approach, so comparatives are not restated. The right of use asset is measured by reference to the lease liability at the date of initial application, adjusted for any previously recognised prepayment or accrual of lease payments. Entities that already prepare IFRS 16 figures for a group's consolidated accounts have a practical expedient available and can carry across the IFRS 16 carrying amounts at the date of initial application.
The catch is data. The modified retrospective route only works if someone has a complete inventory of the client's lease contracts, with commencement dates, terms, break and renewal options, payment profiles and any incentives. That information is rarely sitting neatly in the bookkeeping. It is in signed PDFs, email threads, filing cabinets and the finance director's memory. Chasing it in March 2027, with a filing deadline in view, is a very different job from requesting it in September 2026.
The Conversations That Cannot Wait Until The Year End
Because leases now sit on the balance sheet, some clients will report materially different figures without any change to their underlying business. Bringing lease liabilities into view increases reported debt. Depreciation and interest replace a smooth rental charge, so operating profit and EBITDA typically rise while the expense profile becomes front loaded. Total cost over the life of the lease is unchanged, but the timing and presentation are not.
That matters well beyond the accounts file. Clients need to know before their year end closes if the new numbers could affect:
- Banking covenants tested on gearing, net debt, interest cover or EBITDA. Some facility agreements have frozen GAAP clauses, some do not. Somebody has to read the document.
- Distributable reserves and dividend planning, particularly for owner managed companies drawing dividends against tight reserves.
- Tax computations and deferred tax, where the change in accounting treatment feeds through to timing differences and to the figures your corporation tax work starts from.
- Bonus schemes, earn outs and valuations that reference profit measures defined by reference to the accounts.
- Company size and audit thresholds, where balance sheet total is one of the tests.
A client who hears this from you in September has options. A client who hears it when they see the draft accounts hears it as bad news.
A Practical Plan For The Next Eight Weeks
You do not need a project team. You need a list and a sequence.
- Segment the portfolio. Filter for year ends beginning on or after 1 January 2026 and flag the December 2026 and March 2027 populations first. Then flag clients that lease property or vehicles, and clients with contract based or subscription revenue.
- Run a lease data request now. One standard request, one template, sent to every flagged client. Contract, term, options, payments, incentives. Store it where next year's preparer will find it.
- Test the exemptions early. Identify which leases genuinely qualify as short term or low value, and document the policy choice so it is applied consistently across the file.
- Review revenue policies against the five steps. Pick your ten most contract heavy clients and check whether performance obligations and timing of recognition still support current practice.
- Read the covenants. For any leveraged client, confirm how the facility treats a change in accounting standards, and raise it with the lender early rather than after a technical breach.
- Update templates, disclosure checklists and working papers so the September 2024 edition requirements, including the revised Section 1A disclosures, are built in rather than remembered.
- Brief the team and price the work. First year lease measurement and disclosure is genuine additional work. If your fee letters were written before the review, they do not cover it.
- Write to clients. A short, plain English note explaining that reported debt and profit presentation may change, and that nothing has gone wrong with their business, saves a dozen defensive phone calls later.
Why This Is An Opportunity, Not Just Compliance
Every firm in the country has to apply these amendments. Very few will get ahead of them, because 2026 has been an MTD year. The practices that contact clients in September with a clear explanation, a data request and an early view of the covenant and dividend impact will look like advisers. The practices that surface it in a draft set of accounts in spring 2027 will look like they were caught out.
It is also a natural advisory conversation with clients who rarely buy anything beyond compliance. Lease portfolios, contract terms, funding structures and dividend policy are exactly the areas where a well timed question earns fees and loyalty.
Getting Your Systems Ready
Accounts production is where this becomes real. Make sure your templates, disclosure checklists and working paper packs reflect the September 2024 edition of FRS 102, that lease schedules are captured in a reusable form rather than in ad hoc spreadsheets, and that your practice management data lets you pull the affected client population in seconds rather than by memory. TaxCalc customers can use Accounts Production alongside Practice Manager to identify affected year ends, standardise the lease and revenue information you gather, and keep the audit trail of policy choices in one place.
The FRC published these amendments in September 2024 to give the profession time. That time is now largely spent. Eight months of the first affected period have already gone. The firms that spend September gathering data will spend spring reviewing accounts, and the firms that do not will spend spring gathering data.
