FRS 102 Changes: What They Mean for North East Businesses
- gracebell7
- 7 minutes ago
- 2 min read
The North East has enjoyed strong growth across manufacturing, construction, professional services, retail and hospitality over the past decade. Yet post-Covid challenges and the introduction of revised FRS 102 rules from January 2026 are reshaping how local businesses report their finances.
The biggest shift comes in revenue recognition. A new five-step model now requires businesses to identify each distinct performance obligation within customer contracts, determine transaction prices, and factor in estimates for variable payments such as rebates or discounts. For companies with complex, long-term or bundled contracts, such as construction, manufacturing and professional services, this could mean revenue is recognised over different periods, potentially affecting headline turnover, growth KPIs and bank reporting.
Lease accounting is also changing. Many leases for offices, vehicles or equipment will now move onto the balance sheet, turning rental costs into depreciation and interest. This may alter key figures such as EBITDA and gearing ratios, so management teams should review how the changes may impact lender covenants and funding discussions.
In addition, audit thresholds have increased for financial years starting on or after 6 April 2025. Companies meeting at least two of the following may now qualify for exemption: turnover of £15m or less, assets of £7.5m or less, and 50 or fewer employees. For many owner-managed businesses across the North East, this could mean welcome cost savings and less administrative burden, though it also raises important questions about the level of external assurance that lenders, investors or stakeholders may still expect..
With inflation, wage pressures and recruitment challenges still in play, understanding these accounting changes is more vital than ever. To discuss what the FRS 102 revisions mean for your business, contact Stuart Gardiner at Johnston Carmichael stuart.gardiner@jcca.co.uk
.png)
