UK GAAP - Periodic Review 2024: Changes for leases, revenue, and additional disclosures

What this means for your financial statements?

For accounting periods beginning on or after 1 January 2026, the amendments arising from the Periodic Review 2024 will take effect for entities applying UK GAAP, with important implications for recognition, measurement, and disclosure.

Although there are numerous detailed changes, below we highlight the key areas most likely to impact your financial statements.

Supplier financing: an earlier change to note

Unlike most of the amendments, new disclosure requirements for supplier finance arrangements apply earlier — for accounting periods beginning on or after 1 January 2025.

Supplier finance arrangements typically involve a third-party finance provider settling supplier invoices on behalf of a company, often on more favourable terms than those available directly from suppliers. Where such arrangements exist and the entity is not exempt, companies will now be required to disclose:

• The key terms and conditions of the arrangement;
• The carrying amounts of related liabilities at the reporting date; and
• A comparison between payment terms under the supplier finance arrangement and the company’s standard supplier payment terms.

These disclosures are designed to increase transparency around liquidity and working capital management.

Leases: a major balance sheet change

Under current UK GAAP, operating lease commitments are generally disclosed in the additional notes of the financial statements, with lease payments recognised as an expense in the profit and loss account.

From 1 January 2026, this approach changes significantly. With some limited exceptions, leases will need to be recognised on the balance sheet, giving rise to:

• A right-of-use asset, and
• A corresponding lease liability

Over the lease term, the lease liability will unwind with interest charged to the profit and loss account, while the right-of-use asset will be depreciated over the shorter of the asset’s useful life or the lease term.

On first-time adoption of these changes, companies will need to recognise right-of-use assets and lease liabilities for all existing leases at the start of the accounting period. Comparative figures do not need to be restated.

Certain short-term and low-value leases will continue to be exempt, with costs recognised as an expense. However, for many businesses this change will result in a substantial increase in reported assets and liabilities, which will have an impact on key ratios and covenant calculations.

Revenue Recognition: a new framework 

The Periodic Review introduces a more structured approach to revenue recognition, requiring entities to apply a five-step model:

1. Identify the contract with the customer
2. Identify the performance obligations within the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognise revenue as performance obligations are satisfied

Revenue will therefore be recognised either at a point in time or over time, depending on how and when control of goods or services transfers to the customer.

For obligations satisfied over time, such as construction or long-term service contracts, progress must be assessed at the reporting date. Where progress can be measured reliably, revenue is recognised in line with that progress. If it cannot be measured reliably, revenue recognition is limited to the recoverable costs incurred to date.

Under FRS 102, companies must also restate their opening position when adopting the new revenue rules. This can be done using either:

• A full retrospective approach - restating prior-year figures, or
• A modified retrospective approach - with the cumulative impact recorded in opening reserves

Enhanced disclosures: now mandatory for FRS 102 Section 1A

The Periodic Review 2024 also removes a number of disclosure exemptions previously available to entities reporting under FRS 102 Section 1A. 

From periods starting on or after 1 January 2026, the following disclosures will become mandatory:

• Going concern statement
• Related party transactions
• Dividends declared during the reporting period (for Full FRS102 the dividends paid or payable per each share class)
• Details of share-based payment arrangements
• Detailed movements and descriptions of provisions
• Taxation - a breakdown of tax expense or income, including deferred tax assets and liabilities

These changes will significantly increase the level of information required in small entity financial statements.

Preparing for the changes

This article provides only an overview of some of the most significant amendments introduced by the Periodic Review 2024. The practical impact will vary by business, particularly where leasing, long-term contracts, or complex financing arrangements are involved.

If you would like support in assessing how these changes will affect your accounts, please contact your JS contact.