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      The upcoming amendments to FRS 102, which among other changes introduce IFRS-like revenue and lease accounting to UK GAAP reporters, have been published since March 2024.  Many companies are preparing to implement the standards by starting impact assessments, preparing accounting papers, considering system requirements, and understanding where transition adjustments might arise.

      For an overview of the amendments and what they mean, read our article for an overview of revenue and lease changes, and our other recent article for an overview of other changes.

      One of the questions most companies ask us is: ‘what is the transition going to look like in my accounts, practically?’

      Helpfully, the FRS 102 amendments were designed to be easier to implement than their IFRS counterparts, IFRS 15 and 16.  Below we discuss transition options available, whether comparatives are restated, and some of the expedients available when applying the amendments to save you time and effort.

      Ian Greenwood headshot photo
      Ian Greenwood

      Partner, Accounting Advisory Services

      KPMG in the UK

      Leases as a lessee

      • Comparatives

        Unlike IFRS 16, to introduce simplicity, the amendments only offer one approach: comparatives are not restated.  Instead, existing operating leases are recognised as right-of-use assets and lease liabilities using the remaining lease payments at transition date, and existing finance lease accounting is carried forward without the need to revisit the discount rate at the transition.  Any difference arising from transition is recognised in equity.

      • Group reporting to IFRS parent

        If the FRS 102 company is consolidated into an IFRS parent, the amendments allow IFRS 16 group reporting balances to be applied on the transition date.  I.e. the group lease accounting can be pushed down into the FRS 102 subsidiary, saving time in determining transition adjustments.

      • Lease definition

        The FRC have provided an optional expedient to apply the updated lease definition prospectively from transition.  If taken, the new definition won’t be applied to arrangements entered into prior to transition, saving reassessment of whether complex arrangements meet the definition of a lease.

      • Hindsight for judgements

        The use of hindsight is allowed at the date of transition. Judgements regarding lease term such as options to extend or break a lease are made at the transition date – not back in time to the start of the lease.

      • Lease exemptions

        The short-term lease and low-value assets exemptions also apply from the date of transition, not just to new leases entered into after transition. For example, a 5-year lease with only 10 months remaining at transition would be eligible for the short-term exemption.

      • Discount rate

        A single discount rate can be applied to a portfolio of leases if they have similar characteristics, saving time compared to calculating a different discount rate for each individual lease. As highlighted in our leases article, the amendments offer a simplified approach to determining lease discount rates, allowing the use of an ‘obtainable’ rather than ‘incremental’ borrowing rate.

      Other changes

      • Revenue

        Unlike leases, FRS 102 preparers have a choice of two transition options.  Either to restate comparatives, or not restate comparatives and recognise the effect of transition adjustments in equity on the transition date.  If the restatement approach is chosen, then in certain instances hindsight can be applied for variable consideration and modifications – choosing to take this approach would result in a different restatement approach to leases, where comparatives are restated for revenue, but not for lease adjustments.

      • Supplier financing disclosures

        (applicable from 1/1/25, a year before the other amendments): No supplier financing disclosures are required in the comparative period.

      • Fair value measurement

        The fair value amendments apply prospectively from transition, with no retrospective adjustments or comparative changes.

      • Business combinations

        The amendments only apply to either new business combinations on or after transition, or provisional acqusition accounting at the date of transition.

      • Uncertain tax treatments

        Similar to revenue, FRS 102 preparers have a choice of two transition options.  Either to restate comparatives, or not restate comparatives and recognise the effect of transition adjustments in equity on the transition date.

      • Other

        All other changes not discussed here simply apply retrospectively with comparatives restated (for example, changes related to share-based payments and intangible assets).

      How can we help?

      KPMG’s Accounting Advisory Services team are on hand to help and support preparers with implementation of the FRS 102 amendments.

      Typically, implementation starts with a workshop to kick off the project and upskill your team, followed by an impact assessment, preparation of accounting papers, quantification and disclosure. Do please reach out if you would like to talk to our specialists – there is now less than a year until the transition date!

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