Mid-market firms brace for profit impact as accounting overhaul begins

Nearly three quarters of mid-market business leaders expect mandatory changes to UK financial reporting standards to impact their company’s bottom line, BDO has reported. 

A survey of 500 respondents by the firm found that 70% of businesses preparing accounts under FRS 102 believe new revenue recognition and lease accounting rules will affect net profits. A further 29% said their bottom line may be affected but had not yet completed an assessment. Only 1% of those surveyed expected no impact.

The amendments to FRS 102 took effect for accounting periods beginning on or after 1 January 2026. The updates aim to align UK reporting more closely with international financial reporting standards.

The changes apply to all entities reporting under FRS 102, including charities and not-for-profit organisations. The primary adjustments involve how businesses account for leases and recognise revenue from customer contracts.

Partner at BDO, Rachel Turner, said: “The results from our survey reflect the impact FRS 102 will have across many sectors and businesses. While some businesses and entities have been preparing for the new standard well in advance, many others have yet to initiate their assessment of the changes and of how these will impact their operations and reporting.

“For those businesses playing catch-up, the time really is now to prioritise implementing the changes across operations, from conducting a thorough impact assessment to understand the full implications through to ensuring finance and operation teams are ready to handle the changes.”