Russell Flynn ACA details upcoming changes to financial reporting and the impact\u00a0this has on how you account for leases. <\/h2>\nIf your business leases things such as property, vehicles, or equipment then your accounting is about to change on these matters, and potentially quite significantly!<\/span><\/h2>\nFrom 1 January 2026, FRS 102 lease recognition changes<\/a><\/span> as a result of updates to Section 20 will take effect, bringing in new rules on how leases are to be reported. What once formed a part of your profit and loss will now get a lot more attention.<\/p>\nThat\u2019s why I\u2019ve written this blog post, so that you\u2019re informed and prepared when it’s introduced for the impact with regards to audit thresholds, what to disclose in your financial statements, and the potential impact on your ability to raise finance<\/a><\/span> moving forward.\u00a0<\/p>\nRead on to find out more about what\u2019s coming, why it matters, and what you can do to prepare for it in order to stay ahead.<\/p>\n
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<\/a><\/span><\/span><\/p>\nIn\u00a0this blog post:<\/p>\n
<\/p>\n1. Right-of-use assets: Your new balance sheet addition\u00a0<\/h2>\n
Previously many leases, especially operating leases (those that permit the use of an asset without transferring its ownership rights), weren\u2019t shown on your balance sheet<\/a><\/span>. Instead, you recorded the monthly payment as an expense as part of the profit and loss account<\/a><\/span>. Soon that will not be the case anymore!<\/p>\nUnder the new rules in Section 20<\/span>, nearly all leases will now result in a right-of-use (ROU) asset<\/span> being added to your balance sheet, along with a corresponding liability for future lease payments. This means your balance sheet is about to get heavier.<\/p>\nSpecifically this impacts:<\/p>\n
\n- Commercial property leases<\/li>\n
- Vehicle or fleet agreements<\/li>\n
- Equipment hire<\/li>\n<\/ul>\n
You\u2019ll now need to:<\/p>\n
\n- Record the ROU asset at cost<\/strong> (this should include initial lease payments, and direct costs incurred)<\/li>\n
- Depreciate the asset<\/strong> over the lease term<\/li>\n
- Recognise a liability<\/strong> based on the present value of lease payments<\/li>\n<\/ul>\n
From 1 January 2026, FRS 102 lease recognition changes<\/a><\/span> as a result of updates to Section 20 will take effect, bringing in new rules on how leases are to be reported. What once formed a part of your profit and loss will now get a lot more attention.<\/p>\n That\u2019s why I\u2019ve written this blog post, so that you\u2019re informed and prepared when it’s introduced for the impact with regards to audit thresholds, what to disclose in your financial statements, and the potential impact on your ability to raise finance<\/a><\/span> moving forward.\u00a0<\/p>\n Read on to find out more about what\u2019s coming, why it matters, and what you can do to prepare for it in order to stay ahead.<\/p>\n In\u00a0this blog post:<\/p>\n <\/p>\n Previously many leases, especially operating leases (those that permit the use of an asset without transferring its ownership rights), weren\u2019t shown on your balance sheet<\/a><\/span>. Instead, you recorded the monthly payment as an expense as part of the profit and loss account<\/a><\/span>. Soon that will not be the case anymore!<\/p>\n Under the new rules in Section 20<\/span>, nearly all leases will now result in a right-of-use (ROU) asset<\/span> being added to your balance sheet, along with a corresponding liability for future lease payments. This means your balance sheet is about to get heavier.<\/p>\n Specifically this impacts:<\/p>\n You\u2019ll now need to:<\/p>\n<\/a><\/span><\/span><\/p>\n1. Right-of-use assets: Your new balance sheet addition\u00a0<\/h2>\n
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