FRS 102 vs IFRS: Differences and Which Your UK Company Uses
FRS 102 is the main UK GAAP standard. It is built on the IFRS for SMEs Accounting Standard and amended for use in the UK and Republic of Ireland. Full UK-adopted IFRS is a separate, heavier framework that mainly applies to listed groups. Most private UK companies report under FRS 102, and since 1 January 2026 it has moved noticeably closer to IFRS on leases and revenue.
TL;DR
FRS 102 is based on the IFRS for SMEs Standard, with significant amendments for the UK and Ireland. It is not the same as full IFRS.
UK companies with securities admitted to trading on a UK-regulated market must use UK-adopted international standards for consolidated statements. Most private companies do not.
Most Periodic Review 2024 amendments apply to periods beginning on or after 1 January 2026, adding a five-step revenue model and on-balance-sheet leases.
Moving between frameworks is a project, not a tick-box. Plan for lender covenants, group reporting and investor expectations first.
Table of Contents
How FRS 102 and IFRS relate
The phrase “UK GAAP” covers the accounting standards issued by the Financial Reporting Council (FRC) for entities that do not apply international standards. FRS 102 is the main standard applicable in the UK and Republic of Ireland. So when people search “UK GAAP vs IFRS”, they are usually really asking about FRS 102 against IFRS.
There are three layers worth keeping straight:
Framework | Based on | Typically used by |
FRS 102 | IFRS for SMEs, amended for the UK and Ireland | Most private UK companies, including startups and SMEs |
FRS 101 | Recognition and measurement of IFRS, with reduced disclosures | Qualifying group entities, such as subsidiaries of an overseas parent |
UK-adopted IFRS | Full international standards | Companies with securities on a UK-regulated market (consolidated statements), and any group that chooses it |
FRS 102 is not only for “small” businesses either. The FRC notes that it is available to a wider range of entities than SMEs, and that it balances consistency with global standards against proportionality for preparers.
Who needs which standard
The rule is simpler than the jargon suggests. UK companies whose securities are admitted to trading on a UK-regulated market must use UK-adopted international accounting standards for their consolidated financial statements. Entities that are not required to apply those standards can use FRS 102, and qualifying group entities may use FRS 101.
For a typical founder-led company, that means:
A standalone private company or startup: FRS 102 is the practical default. Very small companies may also be able to use the Section 1A small entities regime within FRS 102.
A UK subsidiary of an overseas group: FRS 101 can be worth considering where the parent already reports under IFRS, as it reduces duplicated work.
A company heading towards a listing or a group reporting under IFRS: you may choose IFRS early so that the numbers do not need converting later.
One size-related point: a March 2025 amendment updated FRS 102 to reflect the changed UK company size thresholds, applying to financial years beginning on or after 6 April 2025. Check where your company sits before assuming you fall under the small regime. Our guide to Section 1A changes for small UK firms covers this.
What changed on 1 January 2026
For years, the headline differences were about leases and revenue. Under the old FRS 102, a lessee split leases into finance and operating, so many leases stayed off the balance sheet. IFRS 16 put nearly all leases on the balance sheet. IFRS 15 used a five-step revenue model, while FRS 102 had its own, older approach.
The Periodic Review 2024 amendments narrow that gap. Most of them are effective for periods beginning on or after 1 January 2026. The FRC’s summary says the amendments introduce a five-step revenue model and require most lessee leases to be recognised on the balance sheet, aligning FRS 102 proportionately with IFRS 15 and IFRS 16.
Leases
The practical effects of the lease changes, according to the FRC, can include:
higher assets and liabilities;
lower rental expense, but higher depreciation and interest;
changes to metrics such as EBITDA;
possible effects on loan covenant compliance.
Transition is modified retrospective, so comparatives are not restated. On first application, the lessee’s incremental or obtainable borrowing rate is used. For new leases after that, the implicit rate is used unless it cannot be readily determined. Our FRS 102 leases checklist walks through the steps, and the IFRS 16 judgements guide shows where preparers under full IFRS get caught out.
Revenue
The new five-step model asks you to identify the contract, identify the performance obligations, set the price, allocate it and recognise revenue as obligations are met. This matters most for businesses with bundled products, subscriptions or long contracts. See the FRS 102 revenue recognition checklist, the SaaS-specific view and, for the full IFRS equivalent, the IFRS 15 checklist.
Presentation
Amendments on adapted financial statement formats take effect for periods beginning on or after 1 January 2027, with early application permitted.
Where FRS 102 and IFRS still differ
Alignment is proportionate, not total. FRS 102 keeps its origins as a standard built from the IFRS for SMEs, so it is shorter and written for a broader population of preparers. Full IFRS is a larger set of standards with more detailed requirements and disclosures, designed for capital markets.
In practice, the differences you are most likely to feel are:
Volume of guidance and disclosure. IFRS asks for more, and for more judgement documented.
Policy options. FRS 102 has historically offered more accounting policy choices than the IFRS for SMEs, and it still differs from IFRS on several measurement topics.
Specialist areas. Business combinations, impairment, consolidation and financial instruments are where the two frameworks can produce different numbers. The detail depends on your facts, so check the specific section rather than relying on a general comparison.
Tax effects. Accounting treatment feeds deferred tax. Our note on FRS 102 deferred tax covers the records to keep.
What to consider before moving between FRS 102 and IFRS
Switching is rarely a free choice for a growing company. Work through these questions first:
Who reads your accounts? Banks, investors and acquirers may expect one framework. Ask them before you decide.
Does a parent or group already report under IFRS? If so, FRS 101 or IFRS may save duplicated effort.
Are you planning a listing or a sale? An IFRS history can ease due diligence, but only if the cost is justified.
What do your loan covenants say? Lease changes can move EBITDA and leverage ratios, so talk to lenders before the first affected period.
Can your systems cope? Five-step revenue and lease schedules need clean contract data. Digital tooling helps, but only when the underlying records are tidy.
What will it cost? More disclosure means more preparation time. Compare that with the benefit, not with the idea of “looking bigger”.
If none of those points pushes you towards IFRS, staying on FRS 102 is usually the sensible choice. The 2026 amendments already bring the most visible differences closer.
Our perspective
Most founders we meet do not choose a framework. They inherit one, and then discover it matters when a lender, investor or acquirer asks a question. Our view is that the standard should follow the business plan: FRS 102 for most private companies, with a conscious decision, made early, if a group structure or exit points to something else.
The 2026 changes are the real near-term job. Leases and revenue touch covenants, margins and how you present your numbers to the people funding you. We would rather our clients model the effect in advance, with comparatives and a short list of judgements documented, than meet it for the first time at year end. Our team has worked at top firms in the UK and the Middle East, and the lesson from both is the same: simple, early and well-documented beats clever and late.
— Shoaib
How Keystone can help
We support UK founders, startups and growing businesses with bookkeeping, VAT, payroll, tax planning, accounts preparation, year-end reporting and audit readiness checks, plus advisory on areas such as IFRS, impairment reviews and consolidation. Our flexible accounting packages are published at £99 to £199 per month. If you are unsure which framework you report under, or how the 2026 changes affect you, see our accounting services or read our overview of types of accounting services for founders.
FAQ
Is FRS 102 the same as IFRS?
No. FRS 102 is based on the IFRS for SMEs Standard, amended for the UK and Ireland, and it is separate from full UK-adopted IFRS. The 2026 amendments bring it closer on leases and revenue, but differences in scope, options and disclosure remain.
Is UK GAAP the same as FRS 102?
Not exactly. UK GAAP is the wider body of FRC standards for entities not applying international standards, and FRS 102 is its main standard. Other parts include FRS 101 and FRS 105 for the smallest entities.
Does my private company have to use IFRS?
Generally not. The requirement to use UK-adopted international standards applies to consolidated statements of companies with securities admitted to a UK-regulated market. Private companies can normally use FRS 102 or, where eligible, FRS 101, and may choose IFRS voluntarily.
When do the new FRS 102 lease and revenue rules start?
Most Periodic Review 2024 amendments apply to periods beginning on or after 1 January 2026. For a company with a calendar year end, that means the 2026 financial year. Leases use a modified retrospective approach, so comparatives are not restated.
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