Date posted: 27th Jan 2025
Leading independent accountancy firm Clive Owen LLP is urging businesses to consider the implications of significant changes to accounting regulations announced by the Financial Reporting Council (FRC).
Businesses operating across a number of sectors could be affected by substantial changes to Financial Reporting Standards 102 (FRS 102), in a move that aims to align the UK’s accounting standards to international standards, IFRS.
The most notable change to the standard is an update to the way in which leases and revenues are shown and accounted for, potentially impacting overall income recognition and bank covenant reporting.
For year ends commencing after 1st January 2026, the majority of operating leases will now appear on the balance sheet, a move which will come as a major change for many businesses. Revenue will also be recognised differently, utilising a five-step recognition model to examine income and transactions in more detail.
Although the changes won’t come into effect until 2026, technical expert, James Davies, Audit Director at Clive Owen LLP, is urging businesses to act now.
James said: “The new regulations will require companies to think ahead and identify how this could impact them. In particular with operating leases coming onto the balance sheet businesses could find themselves subject to audit as well as having to report differently on their loan covenants. This could particularly affect those companies which are set up in multiple locations, resulting in businesses across the retail, care and hospitality sectors being affected the most.
“Though the new rules are not set to be enforced until 2026, significant thought will need to be given now as to the scale of the impact this could have on a company’s financial reporting, and failure to act now could impact on financing and compliance matters.”
Founded in 1983, Clive Owen LLP, which has offices in Darlington, Durham, York, Middlesbrough and Newcastle, has grown from a small business with just one partner into a well-respected firm with over 150 colleagues. The firm prides itself on delivering multi-disciplinary expertise while maintaining a reputation for personal, client-focused service.
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