While there are no new IFRS Accounting Standards coming into effect for accounting periods beginning in 2025, an amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates becomes effective.

Further information on this amendment, together with details of other amendments issued by the International Accounting Standards Board (IASB) with a later mandatory application, can be found in the faculty’s 2025 IFRS Accounts factsheet  and IFRS update 2025 on-demand webinar.

The faculty’s standards tracker can be used to quickly identify which requirements are applicable to a particular accounting period.

Disclosures about Uncertainties in the Financial Statements

In November, the IASB issued Disclosures about Uncertainties in the Financial Statements – Illustrative Examples, which illustrates how requirements of IFRS Accounting Standards can be applied when disclosing information about the effects of uncertainty (including climate-related risks) in the financial statements. The requirements of IFRS Accounting Standards themselves are unaffected.

The illustrative examples have been issued without an effective date. Entities will be expected to implement any changes they need to make as a result of the issuance of the examples on a timely basis. If this is not possible in the 2025 financial statements, entities should consider disclosure of this fact.

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

There are no major amendments UK accounting standards coming into effect for accounting periods beginning in 2025. However, amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland in respect of disclosure of supplier finance arrangements are effective for financial years beginning on or after 1 January 2025.

Further information on this amendment can be found in the faculty’s 2025 UK GAAP Accounts factsheet and UK GAAP update 2025 on-demand webinar.

Preparers should note that a new edition of FRS 102 incorporating the Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024 (“the Periodic Review 2024 amendments”) was published in September 2024. This edition of the standard is not applicable for accounting periods beginning in 2025 (unless the entity has chosen to adopt the Periodic Review 2024 amendments early). To make sure you are using the correct version of FRS 102, together with any relevant amendments , access the “Which version of the standard?” section on the faculty’s faculty’s FRS 102 standards tracker page.

FRS 101 Reduced Disclosure Framework

Applicable from its date of issue in May 2025 is an amendment to FRS 101 Reduced Disclosure Framework that exempts qualifying entities from providing a reconciliation of items of fixed assets for prior periods. This amendment was issued in the 2024/25 cycle of amendments to FRS 101.

To make sure you are using the correct version of UK GAAP accounting standards, refer to the relevant standard on the faculty’s UK GAAP pages.

UK Corporate Governance Code 2024

In January 2024, the FRC published an updated version of the UK Corporate Governance Code (the 2024 Code) and updated guidance on the Code. Among the revisions that took effect for accounting periods beginning on or after 1 January 2025 are new requirements around outcomes-based reporting in Section 1 Board Leadership and Company Purpose and reporting of malus and clawback provisions in Section 5 Remuneration.

The more significant change to the Code – a new requirement under Provision 29 for a declaration of effectiveness by the board in relation to material controls – does not come into force until 2026. See On the radar: Non-financial reporting for more on this requirement.

More information on the 2024 Code can be found in the faculty’s article 2024 UK Corporate Governance Code: what’s different? and on the FRC’s website.

Company size thresholds

Effective for financial years beginning on or after 6 April 2025, the UK Government issued The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303) in late 2024, which increase the monetary size thresholds that determine whether a company is entitled to the regimes for micro, small and medium-sized entities.

In addition, the regulations remove certain disclosure requirements from the directors’ report, including those relating to post-balance sheet events, likely future developments in the business and the employment of disabled persons.

Based on the commencement date and length of accounting period, entities may or may not be able to move down a size category in the 2025/26 reporting season and become eligible for certain exemptions or simplifications. Notably, this may include whether an entity is required to prepare  a strategic report. Care will need to be taken to avoid confusion over entitlement to exemptions or simplifications when producing annual reports in the 2025/26 reporting season. It is also important to note that  the scoping thresholds in the Streamlined Energy and Carbon Reporting (SECR) regulations have not been amended, meaning entities may be required to continue reporting on energy consumption and carbon emissions even after moving down a size category.

More information is available from the faculty in this article and this guide to small and micro-entity reporting. The UK regulations for company accounts hub contains further resources on company sizes and related topics (including filing requirements and available exemptions). See  also the faculty’s factsheet on the Periodic Review 2024 amendments for information on how a company’s entitlement to the regimes for micro, small and medium-sized entities interacts with new accounting requirements. 

The Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025 (SI 2025/439)

As well as making certain changes to the audit regulatory framework, these regulations repealed certain EU-originated directors’ remuneration reporting requirements relevant to UK listed companies. For example, the requirement to disclose the annual percentage change in each director’s pay has been removed. The requirements have been repealed because they largely duplicate pre-existing and continuing UK requirements. The amendment takes effect for periods beginning on or after 11 May 2025. Again, depending on individual facts and circumstances, this may impact entities during the 2025/26 reporting season.

It is evident throughout the Annual Review that many of the FRC’s questions would have been addressed by clearer, entity-specific disclosure. Preparers applying IFRS Accounting Standards should disclose material accounting policy information, while preparers applying FRS 102 should disclose significant accounting policies (including the measurement basis used). By focusing on materiality preparers will be in a better position to provide complete, but concise, disclosure. The usefulness of disclosure is compromised where immaterial information is included, obscuring material information.

Preparers should also be mindful of materiality when presenting line items on the face of the financial statements. Separate presentation of a material item, such as a material impairment, may be necessary to ensure that the entity’s financial statements are understandable. Where the item is not so material as to warrant separate presentation, separate disclosure in the notes may still be necessary to ensure understandability.

Inappropriate offsetting remains a common presentation issue. On the balance sheet, offsetting of financial assets and liabilities, including cash and overdraft balances, is only permitted when the entity has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Entities should take particular care with balances that are part of a cash-pooling arrangement. Offsetting may also lead to inappropriate presentation on the statement of profit or loss. For example, the Annual Review identified cases in which certain expenses, including fees charged by external finance houses, had been inappropriately offset against revenue. The FRC’s September 2024 thematic review of offsetting provides further guidance.

At each reporting date, entities should assess whether there is any indication that an asset or cash-generating unit (CGU) is impaired. IAS 36 Impairment of Assets and FRS 102 Section 27 Impairment of Assets both list sources of information that an entity must consider when assessing if there is any indication that an asset may be impaired. While disclosure in the accounts may not be required, entities are recommended to document such considerations for audit purposes. As well as the sources of information listed in the standards, the ongoing climate of economic and political volatility, including uncertainties regarding tariff regimes and associated trade frictions, could also be indicators of impairment.

Where relevant, care must be taken when identifying the CGU to which an asset belongs. An asset’s CGU is the smallest identifiable group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Complexities arise when CGU calculations involve allocation, such as the allocation of goodwill to a CGU when calculating the CGU’s carrying amount or the allocation of online sales revenue to a CGU when calculating its recoverable amount. Any allocations must be performed on a reasonable and consistent basis, with disclosure provided to allow users to understand allocations.

Goodwill acquired in a business combination should be allocated to the CGU(s) expected to benefit from the synergies of the combination. Reporters preparing accounts under IFRS Accounting Standards should ensure that each CGU to which goodwill is allocated is not larger than an operating segment as defined by IFRS 8 Operating Segments before aggregation.

The Annual Review highlights the importance of clear, comprehensive impairment disclosures that are consistent with relevant information reported elsewhere in the annual report and accounts.
Further guidance on accounting for impairments is available in the faculty’s factsheets on Applying IAS 36 Impairment of Assets and FRS 102: Impairment of Assets. While published in October 2019, the FRC’s thematic review on impairment of non-financial assets remains relevant.

The statement of cash flows continues to cause issues for preparers, appearing second in the FRC’s top ten. Common issues include the misclassification of cash flows (both in individual and consolidated financial statements), as well as inconsistencies between the cash flow statement and information presented elsewhere in the annual report and accounts. To avoid these and other common errors, entities should build robust reviews into the cash flow statement preparation process. Such reviews might consider whether:

• cash flows are appropriately classified as operating, investing or financing;
• figures in the statement of cash flows are consistent with figures found elsewhere in the financial statements (for example, cash flows relating to borrowings should be consistent with those reflected in the notes disclosing changes in liabilities arising from financing activities);
• non-cash movements have inappropriately been included;
• cash amounts have inappropriately been netted off (including in certain situations in which it is inappropriate to treat an overdraft as a component of cash and cash equivalents);
• opening and closing balance sheet figures can be reconciled (allowing the reviewer to cross-check cash amounts to the statement of cash flows); and
• relevant disclosure requirements are met.

The faculty’s guide Statement of cash flows: common pitfalls and tips provides further guidance on how to avoid common errors that entities make when preparing cash flow statements. Preparers may also find the FRC’s November 2020 thematic review of cash flow and liquidity disclosures useful.

Given the climate of ongoing economic and geopolitical volatility, disclosure explaining key judgements and estimates is vital to enable users to understand the effects of uncertainty on the financial statements. In particular, the Annual Review highlights the need for high quality disclosure of judgements and estimates about impairment testing, financial instruments and revenue.

Preparers should ensure that disclosures provide useful information about key assumptions and sources of estimation uncertainty, with company-specific explanations of the uncertainties involved. Simply providing a list of relevant uncertainties is insufficient.

However, the FRC emphasises that quality reporting does not necessarily require a greater volume of disclosure. As noted earlier, preparers should maintain a focus on materiality and, in the case of sources of estimation uncertainty, the assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting period.

The FRC’s 2022 thematic review of judgements and estimates provides provides further guidance on good practice in this area, along with the faculty's guide on judgements and estimates.

For the first time in recent years, consolidated financial statements appears in the FRC’s top ten. The FRC’s findings highlight the importance of adequate disclosure about significant judgements in relation to control.

Except in situations where certain exemptions apply, an entity is required to consolidate an investee when the entity controls the investee. In more complex cases, the existence of control may not be immediately obvious and judgement may be required. For example, an entity may hold less than 50% of the equity of an investee but may still be deemed to have control (or vice versa) based on other factors such as a relevant contractual arrangement. Where significant judgement is required to determine whether an entity controls an investee, the entity should disclose the factors it considered when concluding whether control exists. Such disclosure is required when applying either IFRS Accounting Standards or FRS 102, regardless of the fact that IFRS 10 Consolidated Financial Statements and FRS 102 Section 9 Consolidated and Separate Financial Statements have different definitions of “control”.

Helpsheets from ICAEW’s Technical Advisory Service are available on the exemptions from consolidating available to UK GAAP preparers and groups and consolidated accounts under FRS 102. Preparers may also find the FRC’s recent thematic review of investment trusts, venture capital trusts and similar closed-ended entities useful.

Preparers should ensure that disclosures about tax, including where relevant those relating to Pillar Two income taxes, are transparent, complete and informative. Information in the tax reconciliation should be consistent with information provided elsewhere in the financial statements.

Common issues arise in relation to deferred tax assets. Where deferred tax calculations are particularly complex (for example, calculation of deferred tax assets in relation to share-based payment transactions), preparers should ensure disclosures provide clear information to support the amounts recognised. Additionally, where a deferred tax asset has been recognised in respect of unused tax losses, disclosure to justify the recoverability of such losses may be necessary (for example, when a company has a recent history of losses). Finally, particular care should be taken when determining whether to recognise certain deferred tax movements in other comprehensive income or directly in equity.

More guidance on deferred tax under FRS 102 can be found in the faculty’s factsheet. The FRC’s thematic reviews of deferred tax assets and tax disclosures under IAS 12 Income Taxes (from 2022 and 2016 respectively) provide further guidance.

All companies (except for those that fall within the small companies exemption) are required to prepare a strategic report for the financial year providing a fair, balanced and comprehensive review of the company’s development, position, performance and future prospects. This should include, for example, clear descriptions of the principal risks and uncertainties facing the company and, for quoted companies, the business model and strategy.

A well-constructed report should identify and explain notable issues from the financial statements, such as material impairments. Any explanations provided in the strategic report should be consistent with the assumptions made in the financial statements. Particular  care should be taken to provide unbiased discussion of risks faced by the company, while any discussion of opportunities should also be unbiased. These principles extend to content on sustainability-related matters.

More guidance on preparing strategic reports can be found in the faculty’s guide and factsheet. The FRC has also developed and published non-mandatory guidance on the application of strategic report requirements.

As climate-related reporting matures, the Annual Review highlights common areas of challenge for reporters preparing climate-related financial disclosures (CFD) in accordance with the Companies Act 2006 (CA 2006) (originally issued as the Climate-related Financial Disclosure Regulations 2022) or disclosing information consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The scoping of the CFD requirements is a common pitfall; amongst others, UK private companies with more than 500 employees and more than £500m turnover need to apply the regulations. Further details on the scope of the CFD regulations can be found in the faculty’s factsheet Climate-related Financial Disclosure Regulations.

Preparers should remain mindful of the need for clear disclosure when reporting on climate-related matters. For example, preparers should clarify how greenhouse gas (GHG) emissions data or targets have been calculated, particularly where different reporting boundaries have been used under the TCFD framework than elsewhere in the annual report and accounts. Where there are apparent inconsistencies (eg, with disclosures under SECR regulations), these should be explained.

Scenario analysis requirements can present particular challenges. To comply with CFD requirements, preparers must disclose a qualitative or a quantitative analysis of the resilience of the entity’s business model and strategy considering different climate-related scenarios. Preparers should select scenarios which are most relevant to their business (for example, by reference to specific targets or commitments). There is a general expectation that scenario analysis reporting will mature over time and improve each year. Preparers should therefore keep scenario analysis disclosures under continuous review to identify opportunities for enhancement.

Notably, and as highlighted in the Annual Review, TCFD requirements differ from CFD requirements in certain respects. While TCFD disclosures are provided on a comply or explain basis, CFD disclosures are mandatory and must all be provided. Further, CFD disclosures must all be provided in the annual report and accounts as, unlike TCFD, the CFD requirements do not permit cross-referencing to other sources of information.

Further guidance is available in the FRC’s 2025 thematic review of climate-related financial disclosures by AIM and large private companies.

The Annual Review outlines a handful of issues relating to dividends, including the lawfulness of dividend payments. The CA 2006 only permits the payment of a dividend from distributable profits. Profits available for distribution are typically established from the most recent annual financial statements of an individual company (however, interim financial statements may be used in certain circumstances). Group accounts are not relevant for the purpose of determining distributable profits.

Issued by ICAEW and ICAS, Tech 02/17BL Guidance on realised and distributable profits under the Companies Act 2006 identifies, interprets and applies the principles relating to the determination of realised profits and losses for the purposes of making distributions under the CA 2006.

Several amendments to IFRS Accounting Standards take effect on 1 January 2026:

• Amendments to IFRS 9 and IFRS 7 – Amendments to the Classification and Measurement of Financial Instruments;
• Annual Improvements to IFRS Accounting Standards – Volume 11; and
• Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity.

The faculty’s factsheet 2025 IFRS Accounts includes further information on these amendments.

Two new Standards, IFRS 18 Presentation and Disclosure in Financial Statements and IFRS 19 Subsidiaries without Public Accountability: Disclosures become effective for accounting periods beginning on or after 1 January 2027 (subject to endorsement for use in the UK or EU).

IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 introduces new requirements for classification and presentation in the statement of profit or loss, the aggregation and disaggregation of information and disclosures about certain types of management-defined performance measure. Once effective, IFRS 18 will replace IAS 1 Presentation of Financial Statements.

IFRS 18 requires retrospective application, meaning the accounting period starting in 2026 will be the comparative accounting period. Entities should ensure their preparations for the introduction of IFRS 18 reflect this requirement.

Prior to IFRS 18 taking effect, entities are required to disclose information about the possible impact of the new Standard on the entity’s financial statements in the period of initial application. While entities may have included disclosure about IFRS 18 in their last annual report and accounts, their assessment of the Standard is likely to have progressed over the past year. A more specific commentary about the impact of IFRS 18 on reporting, including on management-defined performance measures and the presentation of the statement of profit or loss, may therefore be possible in this year’s annual report and accounts.

For more information on IFRS 18, refer to the faculty’s factsheet on IFRS 18 and on-demand webinar introducing the Standard's requirements.

IFRS 19 Subsidiaries without Public Accountability: Disclosures

IFRS 19 permits eligible subsidiaries to use IFRS Accounting Standards with reduced disclosure requirements in their consolidated, separate or individual financial statements. It is a voluntary Standard that aims to simplify the reporting process for eligible subsidiaries.

Preparers currently applying FRS 101 Reduced Disclosure Framework should note that the 2024/25 cycle of amendments to FRS 101 prevents entities that apply FRS 101 from also applying IFRS 19. There is no indication that FRS 101 will be replaced by IFRS 19.

As noted in the New reporting requirements for 2025/26 reporting season section above, amendments to FRS 101 became effective in May 2025. Additionally, in March 2025, the FRC issued amendments to FRS 102 and FRS 105 to reflect new legislation regarding company size thresholds (see above for further detail). Both the new legislation and the amendments to FRS 102 and FRS 105 are effective for financial years beginning on or after 6 April 2025.

Significant amendments to UK accounting standards become effective in 2026. The Amendments to FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024 make significant changes to FRS 102, mostly effective for accounting periods beginning on or after 1 January 2026 (with early application permitted). Amendments have been made throughout FRS 102, ranging from incremental improvements and clarifications to the introduction of new models for lessee accounting and revenue recognition that broadly reflect the principles of the equivalent IFRS Accounting Standards.

Amendments have also been made to the other UK accounting standards, most notably to FRS 105 in which a simplified version of FRS 102’s new revenue recognition model is introduced.

Preparers should not underestimate the work that will be involved in implementing the revised UK accounting standards. The faculty has a range of resources to support implementation, all of which can be accessed from its Changes to UK GAAP hub. Resources include:

• factsheets on the Periodic Review 2024 amendments and new revenue recognition model FRS 102’s, with a factsheet on FRS 102’s new lease accounting requirements to follow soon;
• on-demand recordings from recent webinars and the faculty’s Corporate Reporting Conference 2025.

In addition, the FRC has published three new staff factsheets and updated five others.

The UK Government has announced its intention to bring the financial reporting framework within scope of its Modernisation of Corporate Reporting programme. See below for further detail.

As noted earlier, the UK Government issued The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303) increasing the monetary size thresholds that determine whether a company is entitled to the regimes for micro, small and medium-sized entities. This new legislation became effective for financial years beginning on or after 6 April 2025 meaning it will become applicable for many entities from their 2026/27 year-ends. Entities, particularly those close to the thresholds, will need to consider whether they wish to take advantage of reduction in reporting requirements now available to them. For example, any step down in the regime for which an entity qualifies may only be temporary if they are on a growth trajectory.

Also noted earlier, certain changes to the audit regulatory framework and amendments repealing certain EU-originated directors’ remuneration reporting requirements relevant to UK listed companies came into force on 11 May 2025. These changes may impact future reporting requirements.

Laid before Parliament in July 2025, these regulations are effective for financial years beginning on or after 1 January 2026. They introduce requirements to disclose, in relation to qualifying contracts with suppliers, information such as a description of the standard payment period, details of any variations from standard terms and the average number of days taken to pay suppliers in the financial year. Disclosure must be included in the directors’ report and must cover the full financial year. Exemptions are available for small and medium-sized entities and subsidiaries, subject to meeting certain criteria.

Provision 29 has been amended to extend reporting requirements for risk management and internal controls. In the annual report, the board should provide:

• a description of how it has monitored and reviewed the effectiveness of the company’s risk management and internal controls framework;
• a declaration of effectiveness of the material controls as at the balance sheet date; and
• a description of any material controls which have not operated effectively as at the balance sheet date, the action taken, or proposed, to improve them and any action taken to address previously reported issues.

The amended provision takes effect for accounting periods beginning on or after 1 January 2026.

More information on the 2024 Code can be found in the faculty’s article 2024 UK Corporate Governance Code: what’s different? and on the FRC’s website.

In June 2025, the UK government published three consultations aimed at shaping the future of UK sustainability reporting and assurance, including a consultation on draft UK Sustainability Reporting Standards (UK SRS). The outcome of this particular consultation is expected to be the publication of final standards, UK SRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and UK SRS S2 Climate-related Disclosures for voluntary use. The scope and timing of any future mandatory application will be subject to further consultation.

While based on the equivalent standards from the International Sustainability Standards Board, the draft UK SRS included a limited number of amendments intended to make the standards suitable for application in a UK context.

In October 2025, as part of its plans to upgrade the UK regulatory system, the government announced three legislative changes that will be introduced as swiftly as possible:

• the requirement to prepare a directors’ report will be removed for all companies (with key disclosures to be relocated within the annual report and accounts);
• most medium-sized companies will be exempted from the requirement to prepare a strategic report; and
• wholly-owned subsidiaries will be exempted from preparing a strategic report provided their disclosures are included in the UK parent’s annual report and accounts.

The timing of when these changes will become effective is not yet clear.

At the same time, the government announced an expansion in scope of its planned non-financial reporting review. A more holistic consultation, under the reframed Modernisation of Corporate Reporting programme, is expected in 2026. Now including financial reporting, the consultation will consider the Annual Report and Accounts in its entirety.