FRS 102: changes are coming; are you ready? | Section 1A: Application to smaller entities

On 27 March 2024 the FRC released The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024 (FRS 102 (2024)).

As well as the significant changes to Section 20 (leases) and Section 23 (Revenue from Contracts with Customers) the standard also includes a number of amendments to Section 1A presentation and disclosure requirements for smaller entities.

The amendments in Section 20 (leases) and Section 23 (Revenue from Contracts with Customers) apply to small entities. Consequently most small entities will see right-of-use assets and lease liabilities being recognised on balance sheet and may also see a change in the way revenue is recognised.

There are more extensive disclosure requirements in a number of areas including:

• Related party transactions
• Dividends
• Taxation
• Provisions and contingencies
• Share based payments

Next steps

• Agree on your transition plan and communicate this to any stakeholders early.
• Review your contracts in detail to understand the components of the contract including the transaction price and performance obligations.
• Review your lease arrangements to identify any leases where a right-of-use asset will need to be recognised.
• Prepare an impact assessment and draft disclosures early.
• Communicate the changes in related party disclosures and dividend disclosures to stakeholders early so as to carefully manage any sensitivities.

How can we help

• We can assist in the review of your contracts with customers to determine the potential impact of the adoption of the new revenue recognition model.
• We can prepare transition adjustments for the adoption of the lease accounting and new revenue recognition model.
• We can review your impact assessment of the impact of transition and your proposed transition adjustments.
• We can assist in the preparation of your financial statements including the drafting of new disclosure requirements.

Access our full guide

If you would like to discuss how the amendments might impact your business and how PEM can help support you through transition to the new standard, please contact your usual PEM contact.