Background
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)).
The key accounting changes bring closer alignment with International Financial Reporting Standards (IFRS). The revised requirements introduce an entirely new 5-step revenue recognition model which could result in significant differences in how an entity recognises revenue.
Our latest guide provides in depth analysis into the transitional arrangements and disclosure requirements of Section 23.
For further commentary and analysis on the impact of the revisions to FRS 102, visit our FRS 102 hub.
How could this impact you?
Changes to how revenue is recognised under the new requirements can present a number of challenges and unanticipated consequences, including:
- The involvement of significant judgements and estimates
- Impact on an entity’s key performance measures
- Impact on the level of profits available for distribution
- Lack of comparability in an entity’s financial statements
- Increased financial statements disclosures regarding contracts with customers
Given the potential impact of the adoption of these new requirements, it is important to begin planning your transition to the new requirements now
Transition and practical expedients
Section 23 provides entities a choice when transitioning to the revised requirements. These are:
- The modified retrospective approach: the standard is applied retrospectively but the cumulative effect of initially applying the new requirements is recognised as an adjustment to opening reserves with no changes to the previously reported comparative figures
- Full retrospective: the standard is applied in full retrospectively impacting the presentation of both the current and prior year.
In addition to the choice of transition method there are a number of practical expedients that an entity can take advantage of.
We explore the benefits of each of the two transition methods and the practical expedients that are available to an entity in more detail in our full guide.
Next Steps: Access our full guide
It is important to understand the transition and disclosure requirements of Section 23 now so that you can begin the discussions with stakeholders regarding the impact of the changes required by the new standard at transition and on future financial statements.
For more comprehensive analysis and practical considerations for your business, please fill the form below to download our full guide, speak to your usual PEM contact, or contact us with any questions.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key issues rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.