Risk, Compliance and Professional Standards

Key financial reporting updates - May 2024

Louise Kelly
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Substantial changes are set to be made to financial reporting have been announced recently. The UK Government is in the final stages of preparing changes to company size thresholds, increasing them by approximately 50%, effective from October 2024.

Further, the Financial Reporting Council have published amendments to local accounting standards, coming into effect in 2025 and 2026. We discuss each of these changes in more detail below.  

Changes in company size thresholds

The Companies (Non-financial reporting) (Amendment) Regulations 2024 are anticipated to be laid before Parliament before the summer recess, with changes expected to take effect for periods beginning on or after 1 October 2024. 

The changes will increase the size thresholds currently laid out in the Companies Act 2006. Audit and consolidation exemptions are linked to these size thresholds, and therefore more companies may find themselves eligible for such exemptions where they were not previously within scope. 

The proposed new thresholds are:

  Micro Small Medium Large
Annual turnover Not more than £1m Not more than £15m Not more than £54m More than £54m
Balance sheet total Not more than £500k Not more than £7.5m Not more than £27m More than £27m
Average number of employees Not more than 10 Not more than 50  Not more than 250 More than 250

In the same way as the current thresholds, a company will need to meet two out of the three qualifying criteria for two consecutive accounting periods. 

Updates to Financial Reporting Standards 

On 27 March 2024, the Financial Reporting Council issued amendments to FRS 100 – 105 (known as GAAP, Generally Accepted Accounting Practice), a suite of accounting standards applicable in the UK and Ireland. These are used by an estimated 3.4 million businesses in preparing their financial statements.

The changes represent the largest revision of the standards since their launch in 2013 and serve to increase alignment of UK and Irish GAAP with International Financial Reporting Standards (IFRS).

This article explains the key changes, and the potential implications for entities reporting under FRS 102, “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and FRS 105, “The Financial Reporting Standard applicable to the Micro-entities Regime”.

Revenue from contracts with customers

Section 23 of FRS102, and the corresponding Section 18 of FRS105, have been updated to closely align them with the provisions in IFRS 15: Revenue from contracts with customers.

A five-step model is being introduced, with revenue recognition based on the identification of distinct goods and services, performance obligations on the part of the seller, and the consideration the seller will be entitled to on the completion of the contract. Although the changes apply to both FRS102 and FRS105, additional simplifications have been included in FRS105 to assist micro-entities.


Section 20 of FRS102 has been updated to closely align it with the provisions in IFRS 16: Leases. The underlying aim of the standard is to remove off-balance sheet financing, and effectively remove the concept of operating leases for lessees.

All leases, other than short-term or low-value asset leases, will be recognised on balance sheet, with a Right-of-Use asset and a corresponding lease liability being presented.

Lessee accounting remains largely unchanged. The lease amendments have not been applied to FRS105, which retains the existing finance lease and operating lease models.  

Concepts and pervasive principles

Section 2 of both standards has been rewritten, to align with the IFRS Conceptual Framework. The sections have doubled in length, to closely align it with the equivalent international standard and provide additional guidance for GAAP preparers.

The “Fair Value” appendix of the existing Section 2 has been removed, and replaced with a new Section, 2A, aligning it with IFRS 13: Fair Value.

Small companies

In FRS102 section 1A, more clarity will be provided on which disclosures are expected to be necessary for financial statements to give a true and fair view, as required by law. These changes will impact UK entities only and not those presented under Irish company law. Irish entities will continue to be “encouraged” to present additional disclosures but will not be mandated.

Other incremental changes are noted in areas such as share-based payments, deferred tax and specialised activities, although these primarily relate to additional guidance being provided, rather than substantive changes in accounting treatment or disclosures.  

The new standards come into effect for periods beginning on or after 1 January 2026, although early adoption is permitted. Comparatives will need to be restated, and provisions exist around transition to the new standards, with reliefs and exemptions available in certain areas.

Grant Thornton will be providing more detailed information on the significant changes in due course. In the meantime, for further information, and to find out how Grant Thornton (NI) LLP can assist you in navigating these changes, please contact Louise Kelly, Partner.  

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