Contents
Key financial reporting (FRS 102 and IFRS), Company Law, Governance and audit-readiness considerations for Management, Boards and Audit Committees
As 2026 draws to a close, businesses continue to operate against a backdrop of geopolitical uncertainty, changing trade relationships, rapid technological investment and evolving regulation. These developments can have direct consequences for year-end reporting.
The reporting landscape is also changing. For many FRS 102 reporters, 2026 is the first year of applying the FRS 102 Periodic Review 2024 amendments. IFRS reporters face targeted amendments effective in 2026 and should now be advancing towards adoption of IFRS 18, which applies from 1 January 2027. This publication highlights key considerations for Management, Boards and Audit Committees ahead of the 2026 year-end.
Financial reporting developments
FRS 102 Reporters
The Periodic Review 2024 amendments apply to accounting periods beginning on or after 1 January 2026. The most significant changes concern revenue recognition, lessee accounting and fair value measurement. These changes can be significant and should not be left as a year-end disclosure exercise.
Revenue recognition
Revised Section 23 introduces a five-step model based on the fulfilment of performance obligations and the transfer of promised goods or services to the customer. Although straightforward sales may remain unchanged, detailed analysis is likely where contracts contain multiple products or services, hardware and software, licenses, support, variable pricing, customer incentives, customisation or modifications. For each material revenue stream, management should document the enforceable terms, performance obligations, transaction price and allocation of that price across the performance obligations, and the basis for recognising revenue at a point in time or over time.
Lessee accounting
Revised Section 20 brings most leases onto the lessee’s balance sheet through a right-of-use asset and lease liability, subject to specified exemptions. The change may affect EBITDA, finance costs, net assets, gearing, cash-flow presentation, banking covenants and remuneration measures. Management should establish a complete population of property, vehicle, equipment and embedded leases, including leases contained within service or outsourcing contracts, and document lease terms, options, discount rates, relevant payments, transition choices and available exemptions.
Fair value measurement
New Section 2A consolidates fair value measurement requirements and places greater emphasis on valuation techniques, inputs and consistent application. Discounted cash-flow models should incorporate uncertainty and use discount rates consistent with the risks inherent in the underlying cash flows. Companies holding investment property, unquoted investments, derivatives or acquisition-related consideration should assess whether existing valuation processes provide sufficient evidence and appropriate disclosures.
What management should have completed
- a quantified impact assessment for revenue and leases;
- an approved transition-method paper;
- a complete contract and lease population;
- updated accounting policies and disclosures;
- revised chart-of-account mappings and close procedures;
- assessment of loan covenants, earn-outs and remuneration arrangements;
- communication of significant effects to lenders, shareholders, boards and other relevant stakeholders.
IFRS Reporters
For annual periods beginning on or after 1 January 2026, IFRS reporters should assess amendments to IFRS 9 (Classification and Measurement of Financial Assets) and IFRS 7 (Financial Instruments: Disclosures), requirements for nature-dependent electricity contracts and Annual Improvements, Volume 11. Their significance will depend on the entity’s activities and contractual arrangements.
Recurring judgements remain important, including IAS 36 impairment, IFRS 9 expected credit losses, IFRS 15 revenue and contract modifications, IFRS 16 lease terms, IAS 12 deferred tax and IAS 37 provisions. Assumptions should remain consistent with board-approved forecasts, going concern models and relevant external evidence.
Call to Action for Management
By the 2026 reporting date, calendar-year IFRS reporters should have substantially completed their impact assessment, identified data and systems gaps, agreed the treatment of management-defined performance measures and prepared a dry-run statement of profit or loss and related disclosures.
IFRS 18 is now an immediate implementation priority
IFRS 18 becomes mandatory for annual periods beginning on or after 1 January 2027. Because IFRS 18 will generally be applied retrospectively, with comparative information required, 2026 data will form the comparative base for calendar-year reporters. The standard introduces defined operating, investing and financing categories, specified subtotals, disclosures for management-defined performance measures, and enhanced aggregation and disaggregation requirements.
Implementation is broader than redesigning the income statement. Companies should map income and expenses, review performance measures used in public communications, design reconciliations, calculate tax and non-controlling interest effects, assess comparative data and identify systems and control changes. A dry run using the latest annual or interim results can identify issues before mandatory adoption.
External environment and financial reporting implications
The external environment can affect year-end reporting both directly and indirectly. Geopolitical developments, financing conditions and transaction activity may change demand, costs, supply chains, liquidity and valuations.
| 2026 development | What has changed? | Entities exposed | Reporting considerations |
|---|---|---|---|
|
Geopolitical and trade uncertainty remains elevated
|
Middle East conflict has contributed to renewed energy and inflation pressures, while geopolitical tensions, tariffs and trade fragmentation continue to affect internationally exposed businesses and global supply chains.
|
Internationally exposed, energy-intensive and supply-chain-dependent businesses.
|
Forecasts and margins; foreign exchange and input costs; inventory recoverability; impairment; onerous contracts.
|
|
Financing constraints
|
Interest-rate and financing market volatility, availability of capital and financing conditions remain an important year-end reporting consideration, with implications for borrowing costs, refinancing, discount rates, going concern and valuations.
|
Leveraged, capital-intensive, property, construction, private equity owned and manufacturing entities.
|
Liquidity and going concern; refinancing and covenants; discount rates; project timing; impairment; commitments.
|
|
Technology, cyber and AI investment
|
Investment in AI, compute capacity and data-centre infrastructure has accelerated, with particularly significant activity and energy requirements in Ireland. The rate of change in AI has also heightened cyber and operational resilience risks.
|
Businesses dependent on critical systems, third-party providers or technology investment groups.
|
Capitalisation vs expense; useful lives; impairment and obsolescence; provisions; disclosures.
|
Management should consider how these developments affect assumptions in:
- cash-flow forecasts, liquidity, reverse-stress testing and going concern;
- asset impairment and fair value;
- expected credit losses and inventory recoverability;
- provisions and onerous contracts; and
- covenant compliance, waiver timing, and customer/supplier concentration.
Assumptions should be based on the latest available information and applied consistently. If uncertainty is considered significant, management should consider do the financial statements explain the key judgements, sensitivities and outcomes.
Recurring areas of regulatory and audit focus
Regulatory reviews continue to identify recurring areas where judgements, disclosures and supporting evidence require particular attention. While not new for 2026, the following remain common areas of regulatory challenge:
Going concern, liquidity and covenants
The assessment should cover at least 12 months from the date the financial statements are authorised and consider cash-flow forecasts, committed facilities, debt maturities, covenants, plausible downside scenarios and realistic mitigating actions. Particular attention should be given to refinancing and limited covenant headroom. IFRS reporters should ensure liquidity and covenant disclosures explain material maturity and headroom risks, including where non-current liabilities could become repayable within twelve months.
Areas to consider:
- assessment period
- debt maturity
- covenant headroom
- downside scenarios
Impairment, valuation and estimation uncertainty
Models should reconcile to the assets tested and use assumptions consistent with approved forecasts and observable evidence. Growth rates, discount rates, useful lives and longer forecast periods should be supportable, particularly where headroom is limited. Cash flows should reflect the asset in its current condition and exclude uncommitted restructurings or enhancements.
Areas to consider:
- forecast consistency
- market evidence
- growth/discount rates
- useful lives
- sensitivities
Provisions and restructuring
Provisions require evidence that the relevant recognition criteria have been met and should include only qualifying obligations and costs. Management decisions or intentions alone may not create a present obligation, and costs associated with restructuring may fall under other accounting requirements (e.g. employee benefits).
Areas to consider:
- present obligation
- formal plans/communication
- qualifying costs
- onerous contracts
Complex and unusual transactions
Acquisitions, disposals, refinancings, restructurings and bespoke investment or financing arrangements should be assessed based on their commercial substance, including the interaction between linked agreements. Judgement may be required over debt versus equity, control or significant influence, complex instruments, transaction costs, fair value and related commercial arrangements.
Areas to consider:
- substance over form
- linked agreements
- debt/equity
- control
- fair value
Presentation and classification can be as important as measurement.
Management should critically assess the presentation of exceptional, adjusting or separately disclosed items to ensure they are clearly defined, applied consistently and not given undue prominence. Particular care is also required for disposals and discontinued operations, including whether the relevant criteria for separate presentation have been met, the allocation of associated income and costs between continuing and discontinued activities, and the presentation of disposal gains or losses and subsequent adjustments. These conclusions should be consistent across the financial statements, alternative performance measures and other external reporting.
Areas to consider:
- business disposals
- nature, and consistency
- judgements
- comparatives
Audit readiness
Good audit readiness means that material balances, transactions and disclosures are supported by reconciled schedules, documented judgements and evidence that agrees to the final ledger. Early preparation reduces disruption and helps Management, Boards and Audit Committees focus on the matters requiring judgement.
What does good audit readiness look like? The following information should be available before fieldwork:
- a final trial balance mapped to a complete first draft of the financial statements;
- reconciliations and supporting schedules for material balances;
- completed papers for significant judgements, estimates and unusual transactions;
- financing, covenant, tax, valuation and going concern support;
- consolidation and intercompany reconciliations, where relevant; and
- transition papers for new accounting requirements and a documented disclosure review.
Technical papers are most effective when they clearly set out the issue, relevant requirements, facts, alternatives considered, judgement reached, financial impact and required disclosures. They should be prepared and reviewed by management, with supporting third-party evidence available before audit fieldwork.
Audit workflow
Before year end
Confirm reporting requirements and timetable, assess new standards and unusual transactions, initiate valuations, legal letters and confirmations.
At close
Complete cut-off and stock procedures, reconcile balances and intercompany positions, prepare key estimates and general ledger adjustments.
Before fieldwork
Provide first draft of the financial statements, finalise technical papers and disclosure review, ensure audit schedules reconcile to the final trial balance.
Before approval
Refresh going concern and subsequent events, resolve audit differences, complete Board review, confirm signing and filing requirements.
Legal, governance and other regulatory
Ireland – company law and filing reminders
From 16 July 2025, an eligible standalone small, micro or dormant company will generally lose audit exemption for the following two financial years only on a second or subsequent late annual return within a five-year period. The relaxation does not apply in the same way to companies relying on small-group or micro-group audit exemptions, and late-filing fees and other consequences continue to apply.
United Kingdom – company law, filing and governance
Revised company-size thresholds apply for financial years beginning on or after 6 April 2025. Turnover and Total Asset thresholds increased to £1m / £0.5m for micro-entities, £15m / £7.5m for small companies and £54m / £27m for medium-sized companies, while employee thresholds remain unchanged. Companies should reassess their classification and the resulting reporting and audit requirements.
Companies should also consider ongoing Companies House reform under the Economic Crime and Corporate Transparency Act 2023, including identity verification requirements for directors and people with significant control. Mandatory software filing of accounts in iXBRL format is planned from April 2028.
For companies applying the UK Corporate Governance Code, Provision 29 applies for periods beginning on or after 1 January 2026. Boards will need to declare the effectiveness of material controls at the balance-sheet date and explain monitoring, deficiencies and remediation. This requires control mapping, ownership, testing, evidence gathering, deficiency assessment, remediation and review before annual report approval.
Large companies should also consider supplier payment-practice reporting for financial years beginning on or after 1 January 2026. AIM-listed companies should assess the changes effective from 5 August 2026, including UK GAAP eligibility for qualifying UK-incorporated companies and revised governance disclosure requirements.
Sustainability reporting
The EU reforms, referred to as Omnibus I, have brought multiple amendments to the original CSRD sustainability reporting requirements, the first of which Ireland has transposed, which postponed CSRD reporting by two years for Wave 2 and Wave 3 companies. The second of the amendments is still in the process of being transposed in Ireland, with the intention of completing this transposition by the end of 2026. This will introduce new thresholds to determine whether an entity or group faces reporting requirements in Europe, and/or whether the non-EU parent has reporting obligations in relation to its EU operations. These updated thresholds are effective for periods beginning on or after 1 January 2027. Currently, Wave 1 entities remain subject to applicable Irish CSRD requirements.
Sustainability matters should also be considered on how they affect financial reporting matters such as forecasts, impairment, useful lives, provisions and financial statements consistency, for entities of all sizes.
Tax developments and digital readiness
Tax developments can affect current and deferred tax accounting as well as wider business decisions. Relevant Irish developments include the 35% R&D corporation tax credit rate applicable to qualifying expenditure for accounting periods commencing on or after 1 January 2026. Companies should also monitor the enactment and effective dates of measures announced in Budget 2027.
Ireland is also progressing VAT modernisation, with structured domestic e-Invoicing and digital reporting planned to begin for VAT-registered large corporates from November 2028. Affected businesses should consider systems and data readiness.
Final thoughts
The central message for 2026 is early implementation. New accounting requirements, economic assumptions, governance responsibilities and audit evidence should be addressed before the year-end close.
Three characteristics of strong reporting
- Early scoping: requirements are identified before close.
- Evidence-based judgement: significant conclusions are documented and supported.
- Connected reporting: the accounts, narrative reporting, governance disclosures and external communications tell one consistent story.
Six questions for audit committees
- Have current geopolitical and economic risks changed our accounting assumptions and forecasts?
- Are liquidity, covenant and financing disclosures granular enough to explain the real level of headroom and risk?
- Can impairment assumptions be defended against external evidence, historical forecasting accuracy and realistic sensitivities?
- Are significant judgements and estimation uncertainty explained in an entity-specific way rather than through boilerplate?
- Are systems, processes and comparative data ready for IFRS 18, if applicable?
- Is sustainability reporting demonstrably connected to the assumptions, risks and commitments reflected elsewhere in the annual report?
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