Almost three quarters of mid-market businesses say the changes to FRS 102 will affect bottom line

Almost three quarters of mid-market business leaders say that mandatory changes to UK financial reporting standards introduced on 1 January this year will have an impact on their company’s bottom line.

In total, 70% of circa 500 respondents to BDO’s latest Economic Engine survey and whose company's accounts are prepared under Financial Reporting Standard FRS 102 said the changes to revenue recognition and lease accounting rules will affect their net profit figure.

Meanwhile, 29% agreed that their bottom line may be affected but they perhaps hadn’t yet checked. Only 1% of those surveyed said they would not be affected.

The changes to FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) for accounting periods beginning on or after 1 January 2026, bring UK financial reporting more in line with IFRS (International Financial Reporting Standards).

The amendments apply to all businesses already reporting under FRS 102, including not for profit entities.

The main changes expected to have a significant impact on financial statements apply to two areas: revenue accounting and leases. There are also other important changes that businesses should familiarise themselves with.

These amendments could have major commercial implications for businesses in all sectors, including charities and not-for-profits and there are sector-specific considerations.

Rachel Turner, partner at BDO, said:

“The results from our survey reflect the impact FRS 102 will have across many sectors and businesses. While some businesses and entities have been preparing for the new standard well in advance, many others have yet to initiate their assessment of the changes and of how these will impact their operations and reporting.

“For those businesses playing catch-up, the time really is now to prioritise implementing the changes across operations, from conducting a thorough impact assessment to understand the full implications through to ensuring finance and operation teams are ready to handle the changes.”

BDO has prepared the following tips to help businesses adapt to the changes:

1. Conduct an impact assessment to evaluate relevance of the amendments to your business and financial statements, seeking specialist advice as required.
2. Train your finance and operation teams on the new amendments.
3. Revenue contract reviews: Assess contractual terms by revenue stream against the five-step model to identify areas of difference - model the accounting impacts.
4. Lease agreement reviews: Gather all agreements and develop a lease-by-lease listing of every term required for RoU (Right-of-Use) asset and lease liability determination purposes. 
5. Leverage BDO’s specifically developed lease accounting software and managed-service solutions designed to help businesses. 
6. Assess adequacy of risk matrices and related internal controls.
7. Determine the extent to which your accounting systems are fit to handle the new requirements. 
8. Inform stakeholders about the changes and their impact.
9. Gather information to meet the enhanced disclosure requirements.

 

ENDS

Note to editors

BDO surveyed 500 mid-market business leaders in February/March 2026.

BDO UK operates in 17 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.

It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to the entrepreneurial, ambitious and growing mid-sized businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.

BDO LLP is the UK member firm of the BDO international network.

BDO’s global network

The BDO global network provides business advisory services in 169 countries and territories, with 95,000 people working out of 870 offices worldwide. It has revenues of US$11bn.

Contact

Lianne Rimmer
PR Manager
BDO UK
07553 378456 (Mobile)
Lianne.rimmer@bdo.co.uk

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