The amendments are focused on updating UK GAAP accounting requirements to reflect changes in IFRS Accounting Standards, particularly with respect to revenue and leases, and making other incremental improvements and clarifications.

The following principal amendments, which were consulted on within Financial Reporting Exposure Draft (FRED) 82 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review and FRED 84 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Supplier Finance arrangements, have been made:

• New accounting requirements for revenue in FRS 102 and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime based on the five-step model for revenue recognition from IFRS 15 Revenue from Contracts with Customers, with appropriate simplifications. The extent to which this will change an entity’s revenue recognition in practice will depend on the nature of its contracts with customers.
• New lease accounting requirements in FRS 102, based on the on-balance sheet model from IFRS 16 Leases, with appropriate simplifications, for example a higher threshold for recognition of low-value assets on balance sheet where that exemption is taken. This is expected to result in an impact on the financial statements of most entities that are lessees under one or more operating leases.  No equivalent change has been made to FRS 105.

Other incremental improvements and clarifications to FRS 102 include:

• Greater clarity for small entities in the UK applying Section 1A Small Entities regarding which disclosures need to be provided in order to give a true and fair view.
• A revised Section 2 Concepts and Pervasive Principles, updated to reflect the IASB’s Conceptual Framework for Financial Reporting, issued in 2018.
• A new Section 2A Fair Value Measurement, replacing the Appendix Fair Value Measurement to Section 2 and updated to reflect the principles of IFRS 13 Fair Value Measurement.
• New disclosures requirements about supplier finance arrangements within Section 7 Statement of Cash Flows.
• Additional guidance within Section 26 Share-based Payment to aid preparers in applying the principles in certain situations.
• New guidance in Section 29 Income Tax on accounting for uncertain tax positions.
• A number of improvements and clarifications to existing guidance in Section 34 Specialised Activities and consequential changes as a result of other amendments.
• Removal of the option to newly adopt the recognition and measurement requirements of IAS 39 Financial Instruments: Recognition and Measurement under paragraphs 11.2(b) and 12.2(b) (unless needed to achieve consistency with group accounting policies), in preparation for the eventual removal of this option. Entities already applying the IAS 39 option are permitted to continue to apply it.

When applicable, similar incremental improvements and clarifications are made to FRS 105.

As part of the periodic review, the FRC has not made changes to introduce an expected credit loss model, consistent with IFRS 9 Financial Instruments, and no changes have been made to align the standards with IFRS 17 Insurance Contracts.  The FRC has said that any alignment with IFRS 17 or further alignment with IFRS 9 will be part of a future project and subject to consultation in due course.

In developing the Amendments, the FRC considered major and minor changes to IFRS Accounting Standards, the International Accounting Standard Board’s (IASB's) proposed changes in developing the third edition of the IFRS for SMEs Accounting Standard, stakeholder feedback in response to the FRC’s 2021 request for views, and FREDs 82 and 84, and other developments in corporate reporting.

The principal effective date of the amendments is accounting periods beginning on or after 1 January 2026, with early application permitted provided all amendments are applied at the same time.  Earlier effective dates apply to new disclosures about supplier finance arrangements in Section 7 of FRS 102 (periods beginning on or after 1 January 2025, with early application permitted) and a new requirement in Section 6 Transition to this FRS of FRS 103 Insurance Contracts (periods beginning on or after 1 January 2024). Transitional provisions are included. 

The FRC will be holding a webinar on 15 May 2024 to provide an overview of the changes.  During 2024 the FRC will also publish new editions of the standards and updated staff factsheets with guidance on key aspects of the new requirements.

A press release, including links to the Amendments, a three-page summary of the main changes, impact assessment and feedback statement is available on the FRC website.