The FRS 102 transition: Key insights and lessons learned

In June 2025, a live broadcast brought together two subject-matter experts: Gavin Maze, Sales Director for EMEA Occupier & Workplace Solutions at MRI Software, and Richard Olney, Director in CFO Solutions at Grant Thornton UK, to examine the upcoming lease-accounting changes under FRS 102.

With the 2026 reporting deadline drawing near, the session explored practical implications for finance teams, lessons learned from IFRS 16, and the role of purpose-built technology in achieving accurate, efficient compliance.

This article captures and expands on the broadcast’s main discussion points, offering clear guidance for organizations preparing to meet the updated standard. 

Updated lease requirements under FRS 102 become mandatory for periods beginning on or after 1 January 2026. Many leases that once stayed off the balance sheet will now appear as right-of-use assets and corresponding liabilities.

The change is significant, yet with the right preparation, it offers a chance to tighten data discipline and strengthen reporting quality. 

Getting ready: Proactive steps for success 

A fundamental first step is a comprehensive “impact assessment.” Businesses must compile a complete inventory of all leases, extending beyond obvious property agreements to uncover “embedded leases” within service or equipment contracts.

Key details such as commencement and expiry dates, break clauses, rent indexation, and appropriate discount rates need to be meticulously recorded. This comprehensive data will enable finance teams to model the impact of new assets and liabilities on net debt and covenant headroom, providing senior leadership with a clear understanding of the balance sheet transformation.

Gavin Maze noted that for IFRS 16, starting early was crucial, and the same holds true for FRS 102. Early completion of this exercise by companies during the IFRS 16 transition led to smoother audits and accelerated year-end processes.

Early engagement across the business is also vital. Procurement and operations teams often hold lease agreements not typically visible to finance. Similarly, early discussions with external auditors are essential to review draft accounting treatments and disclosure templates well in advance of the year-end.

Granting auditors read-only access to the lease system streamlines their work, allowing them to trace liabilities directly to contract payment terms without extensive additional requests. This reduces fieldwork and minimizes prolonged debates during the financial close.

Securing adequate resources and budget is another critical step. Successful IFRS 16 implementations included provisions for temporary analysts, software licenses, and integration with existing ERP systems.

Allocating time for tax, treasury, and FP&A teams to model covenant and cash flow impacts is equally important. Underestimating these needs can result in rushed decisions on lease terms and discount rates, potentially leading to costly restatements later.

The limitations of manual methods and the rise of technology 

While spreadsheets may have sufficed for managing a small number of leases, FRS 102 demands a level of precision and control that manual systems rarely provide.

Version control issues arise immediately with multiple users, and tracing individual figures through complex formulas can be time-consuming and error-prone.

Specialized lease accounting software effectively addresses these shortcomings by enabling the bulk import of records, enforcing user access controls, and maintaining an auditable link between every journal entry and the relevant contract clause.

As Gavin Maze pointed out, teams that adopted dedicated software before IFRS 16 often experienced a dramatic reduction in data entry hours, sometimes by as much as 80%, and faced fewer follow-up questions during audits.

This transition from manual methods is an opportunity to enhance efficiency and accuracy.

Harnessing AI and building a robust data foundation 

Modern technology, particularly AI, offers significant advantages in streamlining lease accounting.

Advanced platforms utilize optical character recognition (OCR) to efficiently process large volumes of unstructured lease contracts, automatically extracting key data points like rent schedules, escalation clauses, and option dates without manual intervention.

Built-in logic can then compare this extracted data against predefined policy rules, proactively flagging discrepancies such as missing discount rates before they impact the financial ledger.

The continuous monitoring and alerts provided by these systems regarding impending renewals or CPI adjustments help prevent last-minute issues and ensure the ongoing accuracy of lease liabilities.

By automating these traditionally manual tasks, finance teams can free up valuable time and significantly improve data integrity.

For sustained compliance, establishing a robust and centralized data strategy is paramount and requires seamless collaboration across different departments.

Property teams supply executed lease agreements, finance validates the associated cash flows, and legal confirms contractual terms, all feeding into a single, integrated system.

Automated workflows ensure that any lease modifications, extensions, or early terminations automatically recalculate the related assets and liabilities, eliminating reliance on manual spreadsheet updates.

Regular reviews involving auditors, who have full visibility into the audit trail down to the source documents, ensure that the accounting methodology remains consistent with evolving guidelines and minimizes the potential for year-end surprises.

When selecting a technology vendor, Richard Olney advised treating it as a partnership, emphasizing the importance of collaboration and shared goals.

Conducting a small-scale pilot with representative leases before committing to a platform helps verify data extraction accuracy, correct handling of foreign currencies, and alignment of remeasurement calculations with company policy.

Setting clear, measurable targets, such as reduced manual entry time and a decrease in audit adjustments, and revisiting these metrics post-implementation will ensure the chosen solution delivers the anticipated benefits.

Conclusion

FRS 102 compliance remains well within reach when companies begin preparations early, carry out a detailed impact assessment, and rely on software purpose-built for lease accounting.

Experience from IFRS 16 makes one point clear. Reliable, centralized data combined with automated measurement routines and supported by clear cross-department ownership creates the foundation not only for meeting the 2026 deadline but also for producing dependable lease figures in every reporting cycle that follows.

Comments are closed.