If you’re the FD of a UK agency with a 31 December year end, 2026 is your first close under the amended FRS 102.
That’s about ten weeks from today.
This isn’t a disclosure tweak. It’s the biggest change to UK GAAP since FRS 102 came into force in 2015, and for agencies it lands in the two places that matter most.
Revenue. Section 23 now follows a five-step model: identify the contract, identify the performance obligations, set the price, allocate it, recognise revenue as each obligation is satisfied. For agencies that raises hard questions. Is a retainer one obligation or several? When does a milestone actually count as delivered? How do you treat a performance bonus you might not earn? And are you principal or agent on the media you buy for clients, which decides whether that spend is your revenue at all?
The balance sheet. Most leases, including the one on your office or studio, come on balance sheet as a right-of-use asset and a lease liability. Rent disappears from overheads and comes back as depreciation and interest. EBITDA goes up, liabilities go up, and anything measured on those numbers (bank covenants, earn-outs, bonus schemes) may move with them.
Why ten weeks is tight. Before year-end you’ll want your key client contracts reviewed against the five steps, a complete lease register with terms and discount rates, your transition approach agreed, and a conversation with your auditors about all of it. None of that is quick, and most of it can’t start until someone pulls the data together.
We’ve seen this film before. Australia adopted near-identical revenue and lease rules in 2018–19. Its agencies found that revenue changed less than feared, and leases changed more than expected. There’s a full post on what they learned later in the series.
Not on a December year end? The changes apply to periods beginning on or after 1 January 2026, so March, June and September year ends follow through 2027. Same work, a little more runway.
What’s coming. Most of the guidance out there explains what the new rules require. Very little of it talks about retainers, media pass-through, performance bonuses or studio leases, and almost none of it shows you, step by step, how to get there. So every Friday for the next seven weeks:
Why this matters now (this post)
Gross vs net: when pass-through costs stop being your revenue
Retainers, milestones and bonuses under the five-step model
Your office lease is about to land on the balance sheet
Australia did this seven years ago: what their agencies learned
Why the spreadsheet approach breaks
What we’ve built to make this manageable
If you’ve already started your impact assessment, what’s been the hardest part so far?
We’re running a small beta of the tool I’ll show in post 7. If your December close is starting to keep you up at night, drop me a message and I can give you an earlier look.
#FRS102 #AgencyFinance #UKGAAP
