FRED 82: KEY CHANGES TO FINANCIAL REPORTING

The FRED 82 updates to FRS 102 aren’t just tweaks, they’re about making financial reporting clearer, more consistent, and easier to compare. Here’s what they mean for you: 

• Global alignment

  – Bringing UK standards closer to international accounting rules, making it easier for investors to compare businesses. 

• Clearer financial reporting

  – High-quality, transparent financial statements that make sense to users. 

• ACCURATE lease reporting

  – A more accurate reflection of lease obligations, so nothing’s hidden off the balance sheet. 

• Simplified revenue recognition

  – A straightforward five-step model to help businesses recognise revenue consistently across all customer contracts. 

These changes have been designed with flexibility in mind, scaling to fit the size and complexity of the businesses applying them. So, whether you’re a large organisation or an SME, the updates are tailored to work for you. 

The FRED 82 amendments aren’t just about ticking compliance boxes, they’re designed to strengthen financial reporting and support business growth. Here’s how: 

• Better financial reporting = better business decisions

  – Clearer, more comparable financial statements help investors, lenders, and stakeholders make informed choices. 

• Stronger audit quality

  – Consistent, high-quality financial data means smoother audits with fewer grey areas. 

• Easier revenue recognition

  – A standardised approach makes it simpler for businesses of all sizes to account for revenue correctly and consistently, no matter the contract type. 

• Improved access to capital

  – Reliable, transparent financial information can boost investor confidence and make securing funding easier. 

• Global alignment

  – Bringing UK standards closer to international principles reduces ‘GAAP differences’ and enhances comparability across markets. 

Ultimately, these changes are about making financial reporting work better for businesses, auditors, and investors alike, helping to build trust and unlock new opportunities. 

While the FRED 82 changes bring plenty of benefits, they also come with some challenges businesses need to prepare for. The commercial impact could be significant, so it’s worth considering:  

• Key financial metrics

  – How will EBITDA, profit, and net debt be affected? 

• Debt and pension covenants

  – Will these need to be renegotiated if financial ratios shift? 

• Performance-based rewards

  – If bonuses, share options, or other incentives are tied to financial performance, do they need adjusting? 

• Dividend payments

  – Could changes to distributable reserves impact your ability to pay dividends? 

• Access to data

  – Do you have the right data and processes in place to perform the necessary calculations on time? 

Beyond the numbers, implementation could be a hurdle. The amendments may require changes to systems and processes ahead of 1 January 2026, including: 

• Updating charts of accounts 

• Assessing system capabilities 

• Designing new processes to ensure compliance 

The sooner you start planning, the smoother the transition will be. Getting ahead now means fewer headaches later.  

The FRED 82 changes will impact all companies reporting under FRS 102 and FRS 105, that’s an estimated 3.4 million businesses (according to the FRC). While all entities will need to adapt, those with contract accounting and leases will feel the biggest changes. 

What You Need to Do Next: 

• GATHER YOUR INFORMATION

  – Lease agreements can be old and outdated, so knowing your starting point is key. Take stock of your current contracts to avoid surprises down the line. 

• BEGIN with an impact assessment

  – Understanding how these changes will affect your profit and loss, balance sheet, and key financial metrics is crucial. 

• Run the numbers

  – Performing calculations now on key areas like revenue recognition and lease accounting will give you a clearer picture of what’s ahead. 

• Prepare for transition

  – The changes take effect for accounting periods starting on or after 1 January 2026, but early planning will make the shift much smoother. 

With the deadline approaching, now’s the time to get ahead. We’re here to help you navigate these changes and ensure you’re fully prepared. 

The FRED 82 changes are coming, and while 1 January 2026 might seem far off, now’s the time to start planning. Here’s what to keep in mind: 

• The big changes

  – Revenue recognition and lease accounting are the key areas to watch. 

• Numbers will shift

  – Bringing leases onto the balance sheet will impact financial statements. 

• Wider business impact

  – These changes could affect everything from financial metrics to debt covenants and bonus schemes. 

• Don’t wait

  – Early preparation will make the transition much smoother. 

Impact assessment is key. Understanding how these changes affect your business now means fewer headaches later. 

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Working with us will give you the expertise of a Big Four accountancy firm but with a more personal experience. Lots of our team have a Big Four background before moving to Cooper Parry (where the grass is much greener). Our team has depth, we’re big on customer service and our auditors have personality. It’s this approach that has won us numerous awards.

We know you’re not just looking for any old auditor. You’re looking for an audit partner with the systems, processes and relevant experience to handle your business. Yet, you’re also looking for an auditor who’s flexible, sticks to timelines and who’ll prioritise your audit amongst others. You want an adviser that understands your business and strategy as well as the regulatory requirements that you must meet. A team that has expertise in the latest accountancy standards is a necessity.