Big changes are coming to lease accounting under FRS 102 — and they’re just around the corner. For accounting periods beginning on or after 1 January 2026, the updated version of FRS 102 will significantly reshape how leases are recorded, reported, and managed by UK businesses. If this feels familiar, that’s because it is: the new rules will closely align with IFRS 16, a global standard that has already transformed lease accounting for companies worldwide.
For many UK entities, this is more than a simple compliance exercise. The shift introduces a new lease accounting model — one that will bring nearly all leases onto the balance sheet. The distinction between operating and finance leases for lessees will be removed for lessees. In their place? The recognition of right-of-use assets and lease liabilities that better reflect a company’s true financial position.
While the effective date may seem distant, the road to compliance is anything but short. Implementing the new FRS 102 lease model will require a clear, proactive approach — from assessing existing lease portfolios to updating systems and educating stakeholders.
This blog will walk you through five practical steps to approach the 2026 FRS 102 changes with confidence. Whether you’re a finance lead in a growing business or part of a larger reporting team, these steps will help you lay the groundwork for a smooth and successful transition.
Step 1: Understand What’s Changing in FRS 102 and How It Affects Your Business
Successfully implementing the 2026 update to FRS 102 starts with clarity on what’s actually changing — and why it matters.
The Financial Reporting Council (FRC) is introducing a range of amendments to modernise FRS 102, with one of the most significant areas of change relating to lease accounting. These changes are being made to bring FRS 102 more in line with international standards like IFRS 16 and to improve consistency, transparency, and comparability in financial reporting.
If your business currently uses FRS 102, you’re likely familiar with the existing lease model where lessees classify leases as either operating or finance leases — with many leases kept off the balance sheet. That will no longer be the case. From 1 January 2026, most leases will need to be brought on balance sheet via the recognition of:
- a right-of-use asset, and
- a corresponding lease liability
While this mirrors the IFRS 16 approach, it represents a substantial change for many FRS 102 reporters, especially SMEs who have not had to deal with this level of lease detail before. The impact of this change will ripple through balance sheets, income statements, and key financial metrics. If you’d like to explore these changes in more detail about the changes of FRS 102 for lease accounting, please refer to this blog: Key FRS 102 Lease accounting Changes – Lease Accounting Under FRS 102: Changes in 2026 – Rubli
This step is about getting the full picture. Your teams need to be briefed, your stakeholders brought into the loop, and your finance function aligned on the scope and scale of the new FRS 102.
Once you understand what’s changing — and how it aligns with broader international practices — you can begin to shape a tailored approach for your business.
Step 2: Build Your FRS 102 Lease Portfolio and Perform a Readiness Assessment
Once you’ve understood what’s changing in FRS 102, the next step is to get a handle on your current lease portfolio — because under the updated standard, most of these will need to be recognised on the balance sheet.
This starts with a comprehensive lease portfolio. That means identifying every lease contract your business is currently party to, and extracting key data points like:
- Contract start and end dates
- Renewal or termination options
- Fixed vs variable lease payments
- Discount rate assumptions
- Any embedded lease elements in service contracts
Many companies underestimate this part of the process — but the truth is, you can’t comply with the new FRS 102 lease requirements if you don’t know what you’re leasing. This step can also uncover contracts that weren’t previously treated as leases but will now fall within scope under the new rules. A helpful guide to consider for this assessment is How to Identify a Lease Under IFRS 16
As part of this process, it’s wise to run a readiness assessment. This is your opportunity to ask:
- Do we know where all our leases are recorded?
- Do we have access to all signed contracts?
- Are we currently tracking key lease data in a structured format?
- Do our finance and operational teams understand their roles in lease accounting?
It’s also helpful to categorise your leases by asset class (e.g., vehicles, property, equipment) and by complexity (e.g., straightforward fixed-term leases vs those with multiple renewal options). This allows you to prioritise leases that may require more time to assess and model under the new standard.
Remember, this isn’t just an accounting exercise. It’s a business-wide task that may involve procurement, legal, operations, and even IT. A centralised, collaborative approach here will make the rest of the implementation far smoother.
By the end of this step, you should have a clear and complete picture of your lease commitments — a vital foundation for everything that follows.
Step 3: Invest in the Right Tools and Resources for FRS 102
Once your lease portfolio is complete, the next step in approaching FRS 102 implementation successfully is making sure you have the right tools and resources in place to handle the changes — particularly around lease accounting.
While it might be tempting to manage the transition using spreadsheets or your current accounting software, the revised FRS 102 lease model will require more detailed calculations and disclosures than many businesses are used to. For companies with even a moderate number of leases, Excel quickly becomes unsustainable — prone to errors, hard to audit, and difficult to scale when modifications or remeasurements arise.
That’s where dedicated lease accounting software can make a real difference. Refer to our blog that goes into more detail on Reasons to use cloud-based lease accounting software.
The right system will help you:
- Ensure compliance with transition and disclosure requirements specific to FRS 102 Section 20
- Automate lease calculations, including present value, depreciation, and interest
- Track modifications, renewals, and terminations over time
- Generate compliant reports and disclosures for financial statements
- Maintain an audit trail of all lease inputs and changes
But tools alone aren’t enough. You also need the right people — whether that’s upskilling your internal finance team, assigning cross-functional leads, or working with experienced advisors who can guide you through the nuances of the new standard.
For businesses that don’t have in-house IFRS 16 experience (given the alignment in approach), engaging with lease accounting specialists — by leveraging specialist guidance from those who’ve done it before — can help you avoid common pitfalls and get your systems and processes right from day one.
Think of this step as building your implementation toolkit. If your lease portfolio is the raw material, your software and expertise are the machinery that will process it accurately, efficiently, and with confidence.
Step 4: Create a Detailed Implementation Plan (and Stick to It)
A successful FRS 102 implementation won’t happen by accident — it requires a clear, structured plan. This step is about turning your preparation into an actionable roadmap, ensuring that your business is fully compliant by 1 January 2026.
Start with a high-level timeline that includes:
- When your lease data will be reviewed and signed off
- Key system updates or software implementation deadlines
- Decisions on accounting policies (such as lease exemptions or discount rate strategies)
- Staff training sessions
- Time for internal and external reviews
- Final disclosures and board approvals
One key accounting policy decision will be whether to apply the available exemptions under FRS 102 Section 20. Lessees may choose not to recognise right-of-use assets and lease liabilities for:
- Short-term leases (12 months or less), and
- Leases of low-value assets (such as laptops, tablets, office furniture, and telephones).
These examples are explicitly referenced in the standard and can help businesses determine whether the exemption applies in their case. Applying these exemptions can simplify implementation and reduce reporting complexity — especially for businesses with large volumes of smaller leases.
Internal deadlines should fall well ahead of your external reporting timelines — giving you space to test, refine, and review.
Assign ownership across departments — finance, procurement, legal, IT, and even operations. Everyone has a role to play, and clear accountability keeps your implementation on track.
As you move through your plan, don’t underestimate the need for team training and education. Ensuring everyone understands the new rules — especially when it comes to lease classification, modifications, or disclosure requirements — reduces the risk of errors during reporting.
This is also where external support can make a major impact. If your team lacks IFRS 16 experience (which now overlaps with FRS 102), working with a specialist like Rubli Solutions can accelerate your progress. Our tools and expertise are built to support businesses through the technical details, software setup, and strategic decision-making needed for a smooth and compliant transition. With our vast experience in IFRS 16 implementation, we can help you navigate complexities and ensure compliance. Contact us today to learn how our expertise can support your business’s transition and ensure a seamless implementation process
Remember, a good implementation plan includes room for the unexpected. Whether it’s a data gap, a delay in sign-off, or an accounting treatment that needs clarification — planning ahead gives you the flexibility to adapt and stay in control.
Step 5: Apply IFRS 16 Best Practices to Future-Proof Your Lease Accounting
While FRS 102 is a UK standard, the 2026 update brings it into much closer alignment with IFRS 16, especially when it comes to lease accounting. And that’s actually a good thing.
Why? Because many businesses around the world have already been through this shift. They’ve navigated the learning curve, overcome the pitfalls, and established best practices that you can now benefit from. By borrowing from IFRS 16 experiences, you can future-proof your FRS 102 lease accounting processes — and build a more resilient, transparent finance function in the process.
Here’s what that looks like in practice:
- Standardise your lease data management: Create a centralised, consistent process for capturing and updating lease terms, extensions, CPI adjustments, and termination clauses.
- Automate wherever possible: From lease liability amortisations to remeasurements and disclosures, automation reduces human error and saves valuable time.
- Stay audit-ready: Adopt a clear document trail for every lease decision — including approvals, assumptions used, and any changes made. This supports both internal governance and external audits.
- Build in regular review cycles: Lease portfolios aren’t static. Set reminders to reassess contracts for modifications, scope changes, or renewal decisions — all of which may trigger remeasurement.
- Plan for comparability: Aligning with IFRS 16 practices means your reporting becomes more consistent with global businesses — a helpful move for investors, lenders, and group reporting obligations.
Rubli Solutions helps companies do exactly this — not just comply with the new FRS 102 rules but set up smarter systems that evolve with your business. Whether you’re transitioning from scratch or fine-tuning your approach, we bring the tools, templates, and technical support to help you get it right the first time — and keep it right in the future.
Conclusion: The Time to Act Is Now
The 2026 update to FRS 102 is more than just another compliance hurdle — it’s an opportunity to modernise how your business approaches lease accounting and financial reporting as a whole.
By starting early and following the five steps we’ve outlined —
- Understanding the changes
- Building a clear lease portfolio
- Investing in the right tools
- Creating a solid implementation plan
- And applying proven best practices
- You’ll set your business up for a smooth, confident transition.
Starting now reduces pressure, lowers the risk of error, and gives you time to engage stakeholders. But with the right support and structure, you can move from uncertainty to clarity — and from compliance to strategic advantage.
If you’re unsure where to start or need hands-on guidance, Rubli Solutions is here to help. Our team supports businesses across the UK with lease accounting compliance and systems tailored to FRS 102 and IFRS 16 needs.
Let’s talk — and make sure you’re 2026 ready, ahead of schedule.
