FRS 102 Section 1A: Five 2026 Changes Small UK Firms Must Prepare For
FRS 102 Section 1A remains available to UK small entities, but the Periodic Review 2024 makes several disclosures mandatory from 1 January 2026. Directors and finance teams should start collecting comparative revenue, lease and related party information now, because the first accounts prepared under the amended standard must also present comparative figures that meet the new rules.
TL;DR:
For most small companies, first amended accounts require compliant comparative figures for the 2025 financial year, so capture data from its start.
The amendments require revenue terms and principal or agent status, lease expense breakdowns, fuller related party details, share award reconciliations, and deferred tax disclosures.
Start collecting contracts, payment schedules, lease agreements, and related party records at least a full quarter before year end, while agreements remain accessible.
Companies exempt from audit still must provide every mandatory Appendix C note, and abridged statements require all shareholders’ agreement for that year.
Table of Contents
What Section 1A requires in your statutory accounts
Section 1A sets a reduced disclosure framework, not a no-disclosure one. A small entity must still present a balance sheet, a profit and loss account and the notes needed to give a true and fair view, and companies are encouraged (though not required) to present a statement of changes in equity or a statement of income and retained earnings where it helps readers understand performance.
Appendix C of the standard lists the mandatory notes that cannot be left out, regardless of materiality for some items and subject to a materiality judgement for others. ICAEW’s guidance on Section 1A confirms the mandatory minimum and explains when abridged formats are available.
The core Appendix C disclosures include:
Accounting policies applied, where they materially affect the figures presented.
Going concern basis and any material uncertainty affecting it.
Deferred tax balances and the basis on which they are recognised.
Provisions and contingencies, including their nature and expected timing.
Related party transactions, including the relationship and the terms involved.
Dividends declared and paid during the period.
Company law separately mandates certain disclosures, such as directors’ advances and credits, which Section 1A cannot override. Many items previously sitting in the encouraged Appendix E list have now moved into the mandatory Appendix C list, so a note you once chose to add is, for many small entities, now compulsory.
Key disclosure changes effective from 1 January 2026
The Periodic Review 2024 amendments reshape five areas of note disclosure. ICAEW’s technical helpsheet on the 2024 amendments sets out the detail, and the FRC’s announcement on the revised standards confirms that Section 20 (Leases) and Section 23 (Revenue) were rewritten as part of the same exercise.
Revenue: disclose when performance obligations are typically satisfied, the nature of goods or services transferred, significant payment terms, and whether the company acts as principal or agent in each material arrangement.
Leases: provide a general description of lease arrangements, extra disclosure for individually significant leases, and separate expense figures for short-term or low-value leases and for variable lease payments.
Related parties: widen the scope of disclosure, capturing more detail on terms, balances and the nature of the relationship than earlier practice typically required.
Share-based payments: include a reconciliation of the number and weighted average terms of awards, plus the related expense recognised in the period.
Tax: break out the separate components of the tax expense, reconcile deferred tax movements, and disclose unused tax losses available to the company.
Preparers must include comparative information that meets the new disclosure requirements in their first set of financial statements applying the amendments, which means comparative-period data needs capturing from the start of that period, not retrofitted at year end. For most small companies, that comparative period is the financial year beginning in 2025.
For businesses that sell on a subscription basis, the revenue timing rules deserve particular attention. Our SaaS revenue recognition guide walks through how the performance obligation disclosures apply to recurring billing arrangements.
Model accounts and presentation choices for small entities
Authoritative illustrative accounts exist and are worth working from rather than drafting disclosures from first principles. The FRC’s updated factsheets cover transition, revenue and leases with worked examples, ICAEW publishes implementation helpsheets alongside its Section 1A guidance, and major accounting firms, including PwC’s illustrative UK GAAP financial statements, publish full model accounts under FRS 102.
An abridged balance sheet and profit and loss account combine certain line items into fewer totals, but this format is only available where all shareholders agree to it for that financial year, and it still sits alongside the full note disclosures Appendix C requires.
Practical presentation choices worth weighing:
Whether to adopt the abridged format or present the full balance sheet format for clarity to lenders.
How much narrative detail to add around judgement areas such as revenue timing or lease classification.
Whether to present comparative notes in full or cross-refer to prior disclosures where nothing material changed.
Our statutory accounts preparation guide sets out the practical steps for getting a set of accounts from trial balance to Companies House submission.
A compliance checklist for directors and finance teams
Preparing for the 2026 changes is mostly a data problem before it becomes a disclosure problem. The following sequence covers the main actions.
Gather contract and lease data now. Pull contract terms, payment schedules, lease agreements and a related party log covering the comparative period.
Update accounting policies. Document the judgements behind revenue timing, lease classification and any principal versus agent assessment, ready to support the transition note.
Build or source templates. Use fact sheet-based templates for revenue and lease notes rather than drafting from scratch, and adapt them to your own contract types.
Confirm your accounting reference date and filing deadline. Private companies generally have nine months from the end of their accounting reference period to file accounts with Companies House, so map that deadline against when the first compliant comparative accounts fall due.
Check audit status. Audit-exempt small companies still need the mandatory Appendix C disclosures; audited companies should expect their auditors to test the new revenue and lease judgements more closely in the first year of application.
Our FRS 102 leases checklist and revenue recognition checklist break each of these steps into a working template.
Pro Tip: Start the comparative-period data capture a full quarter before your year end, lease and contract detail is far easier to gather while agreements are still current than after they have been archived.
How we help UK small companies meet the Section 1A changes
Revenue recognition and lease disclosure checklists can be provided that map directly to the Periodic Review 2024 requirements, helping prepare transition notes, populate disclosure templates, and document judgement calls on principal versus agent status and lease classification.
What directors should prioritise this reporting cycle
The biggest risk this cycle is not the drafting, it is leaving comparative data capture until after the year end. Lenders and other stakeholders increasingly expect the fuller disclosure Appendix C now demands, so err on the side of including detail rather than trimming it. Document every judgement on revenue timing and lease classification as you make it, and get a second set of eyes on anything genuinely uncertain.
— Shoaib
Get your accounts ready for the 2026 disclosure changes
Mapping the Periodic Review 2024 changes onto your own contracts, leases and related party arrangements takes time most finance teams do not have free this reporting cycle. Mapping can be handled as part of accounts preparation and year-end reporting, building the revenue and lease disclosure templates needed alongside the transition note itself.
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For businesses that run their numbers through spreadsheets before formal accounts preparation, Frac CFO’s spreadsheet-based finance templates can help structure the underlying data before it reaches us.
Services that map directly onto this transition include accounts preparation and year-end reporting, bookkeeping set up to capture contract and lease data correctly from day one, and tax planning that accounts for the new deferred tax reconciliation requirements. Get in touch through our services page to scope a diagnostic call and a clear set of deliverables for your first 2026-compliant accounts.
FAQ
Does the UK use IFRS or GAAP?
UK companies generally report under UK GAAP, with FRS 102 as the main standard for most small and medium-sized entities, while listed groups and some others apply full IFRS. Section 1A sits within FRS 102 as the reduced disclosure regime for small entities.
What is Section 1A of FRS 102?
Section 1A is the part of FRS 102 that sets reduced disclosure requirements for small entities, requiring a balance sheet, profit and loss account and notes rather than the fuller disclosure set in the main body of the standard. Appendix C lists the mandatory notes that small companies must still include.
What is the 2 year rule for company size in the UK?
A company’s size classification for accounting purposes is generally reassessed where it meets or fails the relevant thresholds for two consecutive financial years, which determines whether it qualifies to use Section 1A. The specific turnover, balance sheet and employee thresholds sit in the Companies Act rather than in FRS 102 itself.
What are the key changes to FRS 102 effective from 2026?
From 1 January 2026, the Periodic Review 2024 amendments expand disclosure requirements around revenue recognition, leases, related party transactions, share-based payments and tax. Companies must also present comparative-period information that meets these new requirements in their first set of accounts under the amended standard.
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