Almost three-quarters of mid-market business leaders say recent changes to UK financial reporting rules will hit their company’s bottom line, as firms begin adapting to a major overhaul of accounting standards introduced at the start of the year.
New research from BDO’s Economic Engine survey found that 70pc of around 500 respondents using FRS 102 expect the changes to affect net profits, largely due to revised rules on revenue recognition and lease accounting.
A further 29pc said the changes could impact results but admitted they had not yet fully assessed the implications. Just 1pc of businesses surveyed said they expected no effect at all.
The reforms, which apply to accounting periods beginning on or after 1 January 2026, are designed to bring UK reporting standards closer to international norms set out under IFRS, the global accounting framework used in many listed companies.
The changes apply across all entities reporting under FRS 102, including charities and not-for-profit organisations, meaning the impact is expected to be broad-based rather than confined to corporate balance sheets.
Two areas are expected to drive the most significant shifts in financial statements: revenue recognition — how and when income is recorded — and lease accounting, which changes how long-term rental obligations are reported on balance sheets.
Both adjustments are widely expected to alter reported profitability, asset values and debt levels, even where underlying business performance remains unchanged. Analysts say this could make year-on-year comparisons more complex in the short term, particularly for investors and lenders assessing financial health.
BDO said the findings suggest many businesses are still coming to terms with the scale of the changes, with a significant proportion yet to fully quantify their impact.
The survey highlights the risk that firms may see accounting-driven changes in profit rather than operational shifts, at least in the early stages of implementation.
While the reforms are intended to improve transparency and comparability with international reporting standards, advisers warn they could create confusion for stakeholders unfamiliar with the revised presentation of financial results.
The changes are also expected to have sector-specific consequences, particularly in industries with heavy lease exposure or complex revenue structures, as well as in the charity and not-for-profit sector, where funding and income recognition models may be significantly affected.
As businesses adjust to the new framework, attention is likely to focus on how reported profits evolve under the updated rules — and whether apparent changes reflect real economic performance or simply a new accounting lens.
Rachel Turner, partner at BDO, said: “The results from our survey reflect the impact FRS 102 will have across many sectors and businesses. While some businesses and entities have been preparing for the new standard well in advance, many others have yet to initiate their assessment of the changes and of how these will impact their operations and reporting.
“For those businesses playing catch-up, the time really is now to prioritise implementing the changes across operations, from conducting a thorough impact assessment to understand the full implications through to ensuring finance and operation teams are ready to handle the changes.”
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