Have you assessed the impact of FRS102 on your balance sheet?
Our new dedicated service is here to support this landmark change in accounting standards
Significant changes to FRS 102 effect accounting periods from 1 January 2026 onwards and for many businesses the impact will be more far-reaching than expected.
One of the most important changes affects how leases are accounted for. Under the revised standard, most leases will need to be recognised on the balance sheet as both an asset and a corresponding liability.
This represents a fundamental shift from current practices, where many leases sit off the balance sheet and are charged to the profit and loss account as the expense is incurred.
For many businesses, this could result in a large reduction in net current assets and an increase in reported liabilities.
This may have wider consequences, particularly where financial covenants, lending arrangements or stakeholder reporting are based on balance sheet strength or gearing ratios.
Why this matters now
The new lease accounting requirements will involve:
Reviewing all existing lease arrangements, including property, vehicles and equipment
Calculating right-of-use assets and lease liabilities under the new model
Understanding how these changes affect key balance sheet metrics and ratios
Expanding disclosures within the financial statements
For businesses with borrowing in place, the impact on covenant calculations and lender perceptions need to be considered well in advance.
Our FRS 102 impact review service
To support clients through this transition, Milsted Langdon has introduced a dedicated FRS 102 impact review service, delivered separately from your statutory accounts.
This service is designed to provide early clarity by:
Assessing how the revised lease accounting rules will affect your balance sheet
Quantifying the expected changes to assets, liabilities and key ratios
Identifying additional disclosure requirements under the updated standard
Highlighting potential implications for lenders, investors and other stakeholders
The objective is to give you a clear understanding of the likely impact before the statutory accounts have been prepared, allowing you to plan with confidence.
Here to help
If you would like to discuss the upcoming changes or arrange an FRS 102 impact review, please contact your usual Milsted Langdon adviser or get in touch with our team.