Accounting for long-term contracts under FRS 102 Section 23

A significant overhaul of FRS 102 for upcoming accounting periods will affect reporting of long-term contracts under Section 23 resulting in very different revenue amounts being recognised. Steve Collings FCCA, partner at Leavitt Walmsley Associates, explains

The Financial Reporting Council (FRC) issued amendments to FRS 102 back in March 2024 and these are mandatory for accounting periods commencing on or after 1 January 2026.

The two headline changes, of course, relate to lease accounting and revenue recognition, but other aspects of the accounting treatment are also affected under the revised standard.

This article examines how long-term contracts may be affected under FRS 102 Section 23 Revenue from Contracts with Customers, which contains a comprehensive five-step recognition model, which is critical to the decision making process.

Five-step model

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

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