• Swindon & Wiltshire Professional services
• Tuesday November 10 2026

Just six per cent of businesses ready for major financial reporting overhaul

Less than six per cent of businesses have completed implementation of revised FRS 102 requirements, according to a poll by accountancy firm Azets.

The changes, which include new lease accounting rules and a five-step revenue recognition model, took effect for reporting periods beginning on or after 1 January this year. They will first apply to many companies with a 31 December 2026 financial year end.

Azets’ poll of businesses attending its webinar on UK financial reporting standards found that just 5.88 per cent had completed implementation. More than a quarter, 27.6 per cent, had not started, while 36.5 per cent were still assessing the impact and 22.3 per cent were implementing changes. A further 7.6 per cent said they were mostly implemented.

FRS 102 is the financial reporting standard used in the UK and Republic of Ireland and is regulated by the Financial Reporting Council. The revisions, announced in 2024, are designed to bring lease and revenue reporting closer to international standards, particularly IFRS 15 and IFRS 16.

Under the new rules, leases must be recognised on a company’s balance sheet. Revenue recognition must also set out how and when income from bundled customer contracts is recognised.

Becky Dawson, technical accounting partner at Azets, said the low completion rate was concerning given the approaching year-end deadline. “The 6 per cent figure feels low – especially when you consider that 31 December is one of the most common financial year ends and many companies are about to end their first financial year end under the new requirements,” she said.

Dawson urged businesses not to underestimate the preparation required. While the transition calculations may not be overly complex, she said gathering documentation and reviewing contracts could be a substantial exercise.

Companies with multiple revenue streams, varied customer terms or large lease portfolios may face particular challenges. Businesses without a readily available borrowing rate could also encounter complications.

Dawson warned that some firms may be delaying work in the expectation that auditors will identify issues. “A lot of management judgements have to be made and auditors are simply not in a position to do that,” she said.

Azets said the changes should improve the clarity, transparency and comparability of financial reporting, giving investors, suppliers and other stakeholders a clearer view of a company’s obligations and financial position.

Dawson added that the reforms could feel disproportionate for smaller businesses facing significant upheaval. “In these circumstances, proportionality and materiality must be considered,” she said.

The poll also found that 53.6 per cent of respondents were fairly confident they would be ready for their next year-end reporting cycle, while 19.9 per cent were unsure, 12 per cent were very confident, 12 per cent were slightly concerned and 2.4 per cent were very concerned.

Asked which area of the new UK GAAP changes would have the greatest impact, 58 per cent said lease accounting, 17.7 per cent said revenue recognition, 16.7 per cent said both and 7.6 per cent said neither.

Azets, which has offices in Newbury and Theale, is a specialist business adviser to SMEs.