REDUCE THE BUSINESS BURDEN
Support us in our campaign to reduce the business burden - one change, not two.
We are calling on the Financial Reporting Council (FRC) and UK Government to delay compulsory implementation of the revised FRS 102 until the Modernising Corporate Reporting consultation process and outcomes are concluded.
Simplification should not begin by requiring businesses to implement two successive rounds of complex change.
We strongly believe that implementation of the revised FRS 102 should be delayed while the Government decides what comes next. Any change to accounting standards or legislation places significant time and cost burdens on UK small and medium-sized businesses.
Have your say
It takes a few minutes to
1 Tell us how the changes will affect your business
2 Add your name to the petition
3 Help us build evidence for change
Your data is secure and will only be used for this campaign. Read our privacy policy.
What are we asking? We'd like you to consider the challenge we are preparing. It's a common sense request to delay the need to make significant changes affecting thousands of businesses - when they are likely to change again after the MCR (Modernising Corporate Reporting) consultation. We want to synchronise the MCR consultation with FRS 102 changes so that UK businesses only need to understand, implement and manage one set of changes.
-
Please read our information below
-
Answer our 4 survey questions and sign the petition to show your agreement and support
-
We'll be submitting our challenge to Government and the FRC on 5 November, so early responses are needed
-
The survey and petition will remain open until 30 November 2026
-
We'd also encourage you to read the MCR consultation - the opportunity to respond to this also closes on 30 November 2026
THE ISSUE
One accounting change, or two? Have your say... Small businesses and their advisers are preparing for major changes to lease accounting, revenue recognition and financial statement disclosures.
Yet the Government is simultaneously consulting on a different and potentially simpler SME reporting framework.
THE IMPACT
If the two programmes are not coordinated, businesses may have to pay for two major changes instead of one.
This will have far-reaching effects on small to medium-sized businesses in terms of cost, manpower, IT and systems, as well as time and managing the change.
THE SOLUTION
We are asking businesses, accountants, organisations, MPs, and contacts to support our request to the FRC and UK government...
to delay implementation until the consultation process and outcomes are concluded.
THE TIMELINE
4 November 2026
Respond to our survey
and sign the petition
5 November 2026
Just Audit to present challenge to FRC and UK government
30 November 2026
31 December 2026
Many SMEs with a 31 December year end affected by the implementation of compulsory FRS 102 changes
May 2027
Further changes likely which may simplify, revise or reverse previously enforced FRS 102 changes for SMEs
THE ISSUE, IMPACT AND SOLUTION IN DETAIL
Modernising Corporate Reporting (MCR): should revised FRS 102 be delayed while the Government decides what comes next?
The Government has launched a wide-ranging consultation, Modernising Corporate Reporting to support long-term economic growth. Its stated objective is to create a simpler, more coherent and proportionate reporting framework, reducing unnecessary duplication while supporting economic growth and the UK’s international competitiveness. The consultation closes at 11:59pm on 30 November 2026. [gov.uk]
Those objectives are welcome. Few accountants or business owners would argue against a simpler reporting system, particularly for small and medium-sized businesses.
However, there is an immediate practical question which deserves wider debate:
Why require businesses to implement substantial revisions to FRS 102 now, while the Government is simultaneously considering a fundamentally different SME reporting framework?
What is the Government considering?
The consultation proposes a streamlined UK accounting framework based around four principal standards:
-
UK-adopted International Accounting Standards;
-
UK GAAP for large companies;
-
UK GAAP for SMEs; and
-
UK GAAP for micro-entities.
It envisages extending certain small-company reporting reliefs to medium-sized companies. Under the proposed SME regime, companies could use a dedicated SME accounting standard, would not be required to prepare a cash flow statement, and SME groups could be exempt from preparing consolidated accounts.
The Government also recognises that SMEs generally have less in-house accounting resource than larger companies and that some recognition and measurement requirements derived from international standards may not be suitable for SMEs. It is therefore seeking views on what recognition, measurement and disclosure principles should form part of the future framework.
These are potentially significant reforms. They may lead to a genuinely simpler standard, although the detail has not yet been determined.
At the same time, businesses are having to implement the September 2024 edition of FRS 102 issued by the FRC. Most amendments apply to accounting periods beginning on or after 1 January 2026. For a business with a 31 December year end, this generally means the first affected financial statements will be those for the year ending 31 December 2026. [icaew.com]
The most significant changes include:
-
a new revenue-recognition model;
-
substantially revised lease accounting for lessees;
-
changes to fair-value measurement; and
-
additional or expanded requirements affecting small-company disclosures.
The FRC describes the new Sections 20 and 23 as proportionate alignment with IFRS 16 and IFRS 15 respectively. It acknowledges that the changes will have a significant impact on some preparers. [frc.org.uk]
For small companies applying Section 1A, the amendments include expanded requirements concerning related parties, leases, revenue recognition, share-based payments and taxation. [icaew.com]
This is not simply a change to the accounts template
Implementing revised FRS 102 involves considerably more than adding a few new notes to the financial statements.
Businesses and their accountants may need to:
-
identify and review lease arrangements;
-
obtain information about lease terms, payments, options and discount rates;
-
calculate right-of-use assets and lease liabilities;
-
review customer contracts under the new revenue model;
-
reconsider when revenue is recognised;
-
identify transition adjustments;
-
assess the effect on opening reserves and comparative information;
-
prepare additional disclosures;
-
consider the impact on distributable reserves, tax, covenants, bonuses and performance measures; and
-
ensure that accounts-production and bookkeeping software can process and present the results correctly.
For a straightforward business, the effect may be limited. For a business with numerous properties, vehicles, equipment leases or complex customer contracts, the exercise could be substantial.
Will the software be ready?
There is a further practical risk. Preparers will depend heavily on accounts-production software. Having the right fields in a template is not the same as having software that calculates, maps, transitions and presents every scenario correctly. Experience of earlier major reporting changes suggests that unforeseen software and presentation problems often become apparent only when practices begin processing real client files at scale.
Software suppliers have known about the changes for some time, and many will have undertaken considerable development and testing. Nevertheless, there remains an understandable concern about what will happen when thousands of live sets of accounts, containing different contracts and scenarios, are processed.
Possible pressure points include:
-
transition adjustments and opening balance movements;
-
prior-year and comparative presentation;
-
mapping right-of-use assets and lease liabilities;
-
current and deferred taxation effects;
-
tax reconciliation disclosures;
-
related-party disclosures;
-
revenue disclosures and accounting policies;
-
consolidation and group-reporting adjustments; and
-
electronic filing and tagging.
The issue is not whether the software will contain a revised FRS 102 template. The issue is whether the entire process will work reliably across the wide range of transactions encountered in practice.
Where errors do arise, the cost will ultimately fall on businesses and their advisers through additional preparation time, review time, corrections and delayed accounts.
A risk of paying for two changes
The Government’s consultation expressly recognises the potential cost and disruption caused by changes in accounting standards. That makes the timing particularly important.
If the compulsory implementation of the revised FRS 102 proceeds now, SMEs and their advisers will incur the cost of:
-
implementing revised lease and revenue accounting, transition requirements and additional disclosures; and then
-
implementing a further SME accounting framework if the consultation produces a materially different standard.
That could mean changing systems, policies, calculations, work programmes, staff training and accounts formats twice within a comparatively short period.
While some may be prepared for this, many will not.
The concern is not opposition to change. It is opposition to unnecessary duplication.
Win, win?
No change?
If the consultation ultimately results in no significant change to SME accounting recognition, measurement or disclosure, the revised FRS 102 requirements could still be implemented. The principal consequence would have been a longer preparation period.
Change
If the consultation does result in a different SME framework, coordinating the two programmes could prevent businesses from bearing the cost of two major changes where one properly planned transition would have been sufficient.
Would a delay provide immediate relief?
Temporarily delaying mandatory implementation of the revised FRS 102 requirements could be a straightforward way to reduce the immediate burden on businesses while the consultation runs its course.
A delay would allow time for:
-
the Government to consider consultation responses;
-
the intended shape of the SME framework to become clearer;
-
the Government and FRC to coordinate their respective proposals;
-
software providers to complete and test their products more thoroughly;
-
businesses and accountants to prepare in an orderly way; and
-
unnecessary duplication to be avoided where the eventual SME standard takes a different approach.
Are the new requirements proportionate for small businesses?
There is also a wider question about whether requirements derived from international accounting models are always understandable or useful to owner-managed businesses.
Many business owners naturally think of rent as the monthly cost of occupying premises or using equipment. A balance sheet containing a right-of-use asset and a corresponding lease liability may be technically consistent with the revised standard, but it will not necessarily be intuitive to the owner.
Similarly, the new revenue model may be difficult to apply and understand for those SMEs with sales contracts containing multiple promises and variable consideration.
Accounts should be technically sound, but proportionality also requires consideration of:
-
the cost of producing the information;
-
whether the intended users understand it;
-
whether it changes decisions;
-
whether lenders or owners request it; and
-
whether a simpler treatment would provide sufficiently reliable information.
International groups do not remove the problem
It might be assumed that a UK subsidiary within an international group can simply adopt figures calculated by its parent. That will not always be the case.
Some overseas parent companies do not prepare accounts under IFRS 15 or IFRS 16, or may use a local accounting framework with different requirements. A UK subsidiary may therefore still need to maintain or calculate separate figures to comply with revised FRS 102.
Even where a parent does apply an equivalent international standard, differences in exemptions, discount rates, transition methods, materiality, group reporting instructions or local statutory presentation may mean that group figures cannot simply be reproduced in the UK statutory accounts.
Our view
The objective of simplification is right, but implementation needs to be coordinated.
Businesses should not be required to incur major implementation costs under revised FRS 102 only to be told shortly afterwards that a different SME framework will replace or significantly amend those requirements.
A targeted delay, or at least a coordinated and phased implementation timetable, would:
-
provide immediate relief;
-
reduce the risk of duplicated cost;
-
give software providers more opportunity for live testing;
-
allow the consultation to influence the future standard meaningfully; and
-
give businesses and advisers a clearer, integrated roadmap.
Simplification should not begin by requiring businesses to implement two successive rounds of complex change.