What Is FRS 102?
FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland is the standard that governs the financial reporting of most UK entities that are not required or do not choose to use IFRS as adopted by the UK. It applies to entities that are not micro-entities (FRS 105) and not publicly traded on a regulated market (who must use UK-adopted IFRS). Understanding the differences between FRS 102 and IFRS is essential for accountants who work across both sets of standards or who advise on group structures where some entities use IFRS and subsidiaries use FRS 102.
Key Differences: Revenue
FRS 102 Section 23 Revenue follows broadly similar principles to IFRS 15 but is simpler. It uses a risks-and-rewards approach for goods (closer to old IAS 18) rather than the full five-step IFRS 15 model. Construction contracts use percentage-of-completion. The FRS 102 triennial review (effective for periods beginning 1 January 2026) substantially aligned Section 23 with IFRS 15's five-step model, narrowing this gap significantly.
Key Differences: Leases
FRS 102 Section 20 still broadly follows the old IAS 17 approach — distinguishing between finance leases (on balance sheet) and operating leases (off balance sheet). This is a major difference from IFRS 16, which brings almost all leases on balance sheet. The FRS 102 triennial review (effective January 2026) introduced a right-of-use asset model for FRS 102, substantially aligning it with IFRS 16 for larger entities.
Key Differences: Financial Instruments
FRS 102 Section 11 and 12 provide a simplified approach for basic and other financial instruments. The Expected Credit Loss model of IFRS 9 does not apply under FRS 102 — instead, impairment is based on objective evidence of loss (similar to old IAS 39 incurred loss model). This is simpler but less forward-looking.
Key Differences: Investment Property
FRS 102 permits investment property to be measured at fair value with changes through profit or loss (aligned with IAS 40) or at cost less depreciation. IFRS only permits the fair value or cost model but does not require fair value changes through P&L (they go through P&L under IAS 40).
Key Differences: Goodwill
Under FRS 102, goodwill is amortised over its useful economic life (maximum 10 years if life cannot be reliably estimated). Under IFRS (IFRS 3 / IAS 36), goodwill is not amortised but tested annually for impairment. This is one of the most significant P&L differences between the two frameworks.
The FRS 102 Triennial Review 2026
The Financial Reporting Council's triennial review, with amendments effective for periods beginning on or after 1 January 2026, substantially updated FRS 102 to narrow the gap with IFRS in several areas including revenue, leases, and certain disclosure requirements. UK accountants need to be familiar with these changes.
Further Reading
CPD on FRS 102
Learnsignal's CPD includes FRS 102 update modules covering the 2026 triennial review changes. Explore CPD.
FAQ
Which entities must use IFRS in the UK?
UK companies with equity or debt listed on a regulated market must use UK-adopted IFRS for their consolidated accounts. Subsidiaries and other entities generally have a choice between IFRS, FRS 102, FRS 101 (reduced disclosure framework), or FRS 105 (micro-entities).
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