What owner-managed businesses need to know about UK GAAP changes

For many owner-managed businesses (OMBs), UK GAAP has traditionally felt like a stable and pragmatic framework. However, the Periodic Review 2024 will bring some of the most significant changes to UK GAAP in a decade. The impact will be felt most clearly in accounts prepared under FRS 102.

While the changes apply widely, they have particular implications for OMBs, where financial statements often support compliance, while also shaping funding conversations, dividend policy and strategic decision-making.

For finance leaders and advisers, the challenge is not only understanding the revised technical requirements, but anticipating how reported performance, balance sheets and stakeholder perceptions may shift as a result.

A visible shift to leases on the balance sheet

One of the most far-reaching changes relates to lease accounting. Under previous versions of UK GAAP, operating leases have typically been kept off the balance sheet, with commitments disclosed in the notes and lease payments charged to profit and loss.

From accounting periods beginning on or after 1 January 2026, that changes. With limited exceptions, leases will result in a right-of-use asset and a corresponding lease liability recognised on the balance sheet. Over the lease term, the liability unwinds with interest charged to profit and loss, while the asset is depreciated.

For many OMBs - particularly those with property leases, vehicle fleets or equipment leasing -this is likely to drive a material increase in reported assets and liabilities at transition. Comparative figures will not need to be restated, but companies will need to recognise the right-of-use asset and lease liability at the transition date, with an opening reserves adjustment in most cases.

This is more than a presentational change. Increased leverage may affect ratios used by lenders and could prompt covenant considerations or, at the very least, more detailed conversations with banks. It may also change perceptions. Stakeholders unfamiliar with the new treatment could interpret the lease liability as “new debt”, even though underlying cash flows have not changed.

Aligning profit with performance

The Periodic Review also introduces a new, more structured framework for revenue recognition under FRS 102, built around a five-step model. The emphasis moves towards recognising revenue as performance obligations are satisfied, rather than simply when invoices are raised.

For straightforward transactions, the impact may be limited. But for businesses with long-term contracts, bundled goods and services, or staged delivery arrangements, the timing of revenue, and therefore profit, could look materially different.

Where performance obligations are satisfied over time, such as construction-style contracts or ongoing service arrangements, businesses will need to assess progress at each reporting date. If progress can be measured reliably, revenue is recognised in line with that progress. Where it cannot, revenue is restricted to recoverable costs incurred.

Adoption of the new approach also requires companies to restate their opening position. This can be achieved through either a full retrospective approach (restating comparatives) or a modified retrospective approach (with the cumulative impact taken to opening reserves). In practice, owner-managers should be prepared for adjustments that could affect distributable reserves and make year-on-year trends harder to interpret in the short term.

Small companies in the spotlight

Less headline-grabbing, but no less important, are the enhanced disclosure requirements. The Periodic Review removes or narrows several exemptions previously available to entities reporting under FRS 102 Section 1A, replacing them with a more consistent baseline of disclosures.

From periods beginning on or after 1 January 2026, small entities will be required to include disclosures that many OMBs may not historically have associated with “small company” accounts. These include going concern statements, related party transactions, dividends declared during the period, share-based payment arrangements, details of provisions, and expanded tax disclosures, including deferred tax.

For OMBs, related party disclosures may require more careful documentation and review. While the intention is greater transparency, the step up in detail may feel significant for businesses that have previously operated with fewer disclosure requirements.

The importance of early preparation

Taken together, these changes mean owner-managed businesses and finance teams cannot afford to leave preparation too late. Lease registers will need to be revisited and populated with information that may not previously have been captured. Customer contracts should be reviewed to identify performance obligations and assess how revenue will be recognised. Financing arrangements, including supplier finance, should be clearly understood and documented.

The Periodic Review 2024 introduces meaningful change. But with early planning and clear communication, OMBs can manage the transition with confidence and, in some cases, use the process to strengthen the quality of financial insight they rely on.

If you’d like support assessing the likely impact on your business, particularly around leases, revenue recognition, or the new disclosure requirements, at JS, we work with owner-managed businesses to translate technical change into practical, commercial action.