Latest amendments to UK GAAP

The Financial Reporting Council has issued its latest round of periodic review amendments to UK GAAP. Amongst the changes is the introduction of a comprehensive five-step model for revenue recognition

The changes are effective for accounting periods beginning on or after 1 January 2026

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Transition

The FRC has said that entities transitioning to the revised Section 23 have two choices. Entities can apply the requirements retrospectively, including restatement of comparatives. Alternatively, entities may apply the requirements retrospectively but without restating comparatives. Instead, the cumulative effect of initially applying the standard will be recognised as an adjustment to opening retained earnings. Under this option, only incomplete contracts at the date of initial application need be adjusted for.