FRS 102 (Financial Reporting Standard 102) is the principal accounting standard for UK entities not applying IFRS. It sets out the recognition, measurement, presentation, and disclosure requirements for transactions and events that are important in general purpose financial statements of UK companies.
In Depth
FRS 102 is the accounting bible for UK private companies. Understanding its key sections helps FP&A teams ensure their management reporting is consistent with statutory accounting and anticipate how business decisions will be reflected in the financial statements.
Key sections relevant to FP&A include: Section 4 (Statement of Financial Position — balance sheet format), Section 5 (Statement of Comprehensive Income — P&L format), Section 11/12 (Financial Instruments), Section 17 (Property, Plant and Equipment — depreciation), Section 18 (Intangible Assets — capitalisation criteria), Section 19 (Business Combinations and Goodwill), Section 20 (Leases), Section 21 (Provisions and Contingencies), Section 23 (Revenue), Section 27 (Impairment of Assets), and Section 29 (Income Tax).
For FP&A teams, several FRS 102 areas have particular planning impact. Revenue recognition under Section 23 determines when and how revenue appears in the P&L. Development cost capitalisation under Section 18 affects both the P&L (lower costs from capitalisation) and the balance sheet (intangible asset creation). Lease classification under Section 20 determines whether lease payments appear as operating expense or as depreciation plus interest.
FRS 102 was revised significantly in 2024 (effective for periods beginning on or after 1 January 2026), bringing it closer to IFRS in several areas. FP&A teams should prepare for the impact of these changes on their reporting and planning models.
Real-World Example
A UK software company's FP&A team navigates FRS 102 Section 18 for development cost capitalisation. The team demonstrates that their new product module meets all capitalisation criteria: technical feasibility proven through alpha testing, management intends to complete and launch, the product will generate probable future benefits, adequate resources are available, and costs can be reliably measured. They capitalise £480K of development costs, reducing the current-year P&L charge and creating an intangible asset amortised over 4 years.
Related Terms
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful econ...
Amortisation is the systematic allocation of the cost of an intangible asset over its useful economi...
IFRS (International Financial Reporting Standards) is a set of globally recognised accounting standa...
UK GAAP (Generally Accepted Accounting Practice) is the set of accounting standards and practices ap...
Corporation tax is the tax levied on the profits of UK limited companies and certain other entities....
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