This guide explains how to apply the new Lease Accounting model under FRS 102, introduced by the Financial Reporting Council (FRC). The updated model increases transparency and comparability by requiring most leases to be recognised on the balance sheet.

These changes apply to accounting periods beginning on or after 1 January 2026, with early adoption permitted.

BrightAccountsProduction now provides full support for this model across Limited Liability Partnership templates for Ireland, the United Kingdom, and Northern Ireland.

Overview of the New Lease Accounting Model

The amendments to FRS 102 align lease accounting more closely with IFRS 16, introducing a single on-balance-sheet model for lessees.

Under the new approach: • Lessees must recognise a Right-of-Use (ROU) Asset and a Lease Liability for all leases. • Short-term leases and low-value leases are exempt. • Lease liabilities represent future lease payments. • ROU assets represent the lessee’s right to use the leased asset.

Prerequisites

Before using the new lease accounting features, ensure the following conditions are met:

• Country of Incorporation is set to Ireland, United Kingdom, or Northern Ireland. • Financial Reporting Standard is set to FRS 102 or FRS 102 Section 1A. • Lease-related transactions are posted to Nominal 922 – Long Term Lease Obligations.

Step-by-Step Instructions

Step 1 – Verify Your Business Setup

1. Open your client dataset.
2. Confirm the accounting period start date is on or after 1 January 2026.
3. Go to Business Settings and verify the Country of Incorporation.

Step 2 – Confirm Your Reporting Standard

1. Open the Compliance Database.
2. Ensure the Financial Reporting Standard is set to:
   • FRS 102, or
   • FRS 102 Section 1A.

Step 3 – Enable the New Lease Accounting Option

1. Navigate to: Compliance Database → Legislation, Compliance and Disclosure → Accounting Options
2. Enable: Follow FRS 102 Lease Accounting Standard for Accounting Periods Commencing on or After 1 January

Note: This option only appears when lease postings exist under Nominal 922.

Step 4 – Optional: Display Right-of-Use Assets Separately

To show Right-of-Use Assets as a separate line on the Balance Sheet:

1. Navigate to: Compliance Database → Legislation, Compliance and Disclosure → Accounting Options
2. Enable: Show Right-of-Use Assets separately on face of Balance Sheet

Step 5 – Ensure the Correct Trial Balance Nominals

Your trial balance must include the following nominal codes:

Step 6 – Configure Tangible Assets in the Compliance Database

1. Navigate to: Compliance Database → Intangible and Tangible Fixed Assets → Tangible Assets
2. Use the dedicated Right-of-Use Assets section to configure related disclosures.

Step 7 – Produce the Accounts

When the accounts are generated, the system will automatically:

• Insert the Lease Accounting Policy into the Accounting Policies section. • Add two new notes:

• Right-of-Use Assets
• Other Tangible Assets • Update the Balance Sheet to reflect lease-related assets and liabilities.

What Changes Will You See in the Accounts?

Balance Sheet Updates

When the lease accounting option is enabled:

• Right-of-Use Assets appear as a separate Balance Sheet line item (if selected). • Current liabilities include: Creditors: amounts falling due within one year, including lease liabilities. • Non-current liabilities include: Creditors: amounts falling due after more than one year, including lease liabilities.

All lease liabilities reconcile automatically to the general ledger postings.

Notes to the Accounts

The system automatically generates:

• The Lease Accounting Policy • Two dedicated notes:

• Right-of-Use Assets
• Other Assets

Additional Amendments to FRS 102

Alongside the new lease accounting model, the FRC has introduced further amendments, including:

• Clarifications on required disclosures for small entities. • Updates reflecting the IASB’s revised Conceptual Framework. • A new section on Fair Value Measurement. • Removal of the option to newly adopt IAS 39, except where required for consistency within group accounting policies.

These changes aim to improve clarity and consistency in financial reporting for entities in the UK and Ireland.

FRS 102 Lease Accounting Enhancements – Revenue & Lease Recognition Updates

Overview

The Financial Reporting Council (FRC) has introduced significant amendments to FRS 102 and FRS 105, effective for accounting periods beginning on or after 1 January 2026, with early adoption permitted.

BrightAccountsProduction now includes further enhancements to support the updated lease accounting model under FRS 102, improving disclosure automation, reporting accuracy, and compliance with Section 20 – Leases.

Key Enhancements

The following enhancements have been introduced:

• Automated Operating Profit lease disclosures
• Automated Cash Flow Statement lease-related notes
• Improved categorisation of lease expenses and cash flows
• Enhanced creditor presentation for lease liabilities
• Fully compliant year-end disclosure formats

Enhancement 1: Operating Profit Disclosure – Lease Details

The Operating Profit note has been enhanced to provide clearer lease-related disclosures.

The system now automatically includes:

• Expenses relating to lease payments not included in lease liabilities, including:
  • Short-term leases
  • Variable lease payments
  • Leases of low-value assets

These values populate automatically based on postings to the relevant nominal codes.

Benefits

• Clear distinction between capitalised and non-capitalised lease costs
• Fully compliant with FRS 102 Section 20 disclosure requirements
• Improved visibility within the Operating Profit section

Enhancement 2: Cash Flow Statement – Lease Disclosures

The Cash Flow Statement now includes automated lease-related disclosures.

The system generates:

• Interest on lease obligations
• Principal repayments of lease liabilities
• Total cash outflow relating to leases

These figures automatically reconcile with the lease liability ledger.

Benefits

• Accurate and audit-ready cash flow reporting
• Consistent linkage between ledger and disclosures
• Reduced need for manual calculations

Enhancement 3: Creditor Impact

Lease Liability Presentation

Under the revised FRS 102 lease accounting model, lease liabilities are now recognised within the creditors section of the balance sheet.

Lease liabilities are presented as:

• Amounts falling due within one year
  • Short-term lease liabilities
• Amounts falling due after more than one year
  • Long-term lease liabilities

This change brings previously off-balance-sheet lease commitments into the financial statements.

Impact

• More complete visibility of financial obligations
• Improved transparency for stakeholders
• Enhanced compliance with FRS 102 requirements

Additional FRS 102 Amendments

The update also reflects broader changes introduced by the FRC, including:

• Clarifications for small entity disclosures
• Alignment with the IASB Conceptual Framework
• Introduction of a new Fair Value Measurement section
• Removal of the option to newly adopt IAS 39 (except for group consistency)

Summary

These enhancements ensure that BrightAccountsProduction:

• Fully supports the FRS 102 lease accounting model (2026)
• Automates key disclosures and reporting requirements
• Improves accuracy, transparency, and compliance

Users should review lease postings and ensure all relevant transactions are mapped to the correct nominal codes to benefit from full automation.