Lease accounting compliance at risk: one in four businesses unaware of new regulations, research by IRIS Software Group shows
- A quarter of UK businesses (24%) unaware of incoming changes to FRS 102 regulations
- Three-quarters (75%) set to significantly change their financial reporting process and more than half (52%) anticipating the changes to increase costs
LONDON, March 19, 2025 /PRNewswire/ -- New research from IRIS Software Group, a leading global provider of accounting, edtech, HR and payroll solutions, reveals that more than 720,000 UK businesses risk fines or financial penalties due to non-compliance with incoming lease auditing regulations, a new survey reveals. A quarter (24%) of respondents are completely unaware of the changes, leaving them vulnerable to legal and financial repercussions.
Businesses have less than a year before amendments to the FRS 102 legislation come into place on 1 January 2026. The most significant change is that assets acquired on a lease must now be reported on balance sheets, adding a layer of complexity to financial reporting. Non-compliance with FRS 102 could lead to significant financial penalties – especially for larger companies – an accumulation of unpaid tax and reputational damage with key new and existing clients.
Of those that are familiar with the new regulations, three quarters (75%) say that the changes to the leasing standard will require them to significantly change how their firms' financial reporting processes, while nine in 10 (89%) say it will impact how they go about leasing goods.
Business equipment forms the majority of assets acquired on lease (42%), followed by IT equipment (38%) and real estate and property (37%).
Mark Chambers, Managing Director – Accountancy at IRIS, said: "Bringing leases onto the balance sheet is a daunting task, and a lot of businesses have ground to make up with just ten months to go. But meeting the requirements by the new year is by no means out of reach.
"Firms have faced similar changes to regulations before, such as when IFRS 16 was introduced in 2019. By working with IRIS and Innervision, firms can lessen the burden of this change and take the new legislation in their stride.
"Effectively evolving financial reporting means allowing for longer than you think you need to make the changes, committing resources to gather the masses of data and keeping on top of the reporting once the leases have been brought onto the balance sheet."
The survey found that UK businesses are at various stages of progress towards becoming compliant. Two in five (38%) are still taking the time to assess the impact that the changes will have on their business, with more than a third (34%) yet to inform stakeholders, highlighting the amount of work that lies ahead.
Industrial firms, which include manufacturing, construction and automotive companies, are at highest risk of falling foul of the FRS 102 legislation. They're almost twice as likely than average to say that the new leasing standard will sap their resources, more than half (52%) saying that it'll have a negative impact on their costs.
Most respondents to the survey store data and contract information in desktop tools like Excel (46%). But more than a quarter (26%) reveal that data is scattered across multiple locations while a fifth (21%) are still using a paper filing system.
More than half (56%) of the businesses surveyed say they are investing in lease accounting software to help them manage the data and ensure compliance with FRS 102.
Mark added: "UK businesses are facing a number of headwinds, but with greater awareness of the challenges coming and taking the time to plan ahead of time can mitigate against some of this risk. Firms have an opportunity to move beyond some of their outdated processes to drive more efficient financial reporting, helping to reduce costs and free-up staff time.
"Tech and software is a proven aid for accounting, helping professionals gather, manage and track data effectively and make year-end reporting far less stressful. Proactive planning, stakeholder engagement and investment in the right tools are critical to ensure compliance and unlock significant benefits, including enhanced lease portfolio visibility, stronger governance and cost efficiencies."
IRIS supports 93 of the top 100 UK accountancy firms and helps medium-sized and enterprise-level organisations around the world to automate lease accounting compliance with its leading software IRIS Innervision. The tool automates time-intensive jobs, centralising information and ensuring accuracy, so that compliance is guaranteed.
As organisations transition to the amended FRS 102 lease accounting standard, IRIS has developed the report to highlight key insights from the recent survey on readiness, as well as practical steps to help organisations navigate the transition with confidence.
You can download the full report here.
The research was conducted by Censuswide, among a sample of 500 in-house accountants. The data was collected between 22nd – 27th January 2025.
Media contact
IRIS Software Group
news@irisglobal.com
About IRIS Software Group
IRIS Software Group is a global provider of mission critical software and one of the UK's largest privately held software companies. IRIS provides software solutions and services for finance, HR and payroll teams, educational organisations, and accountancy firms that takes the pain out of processes and lets professionals focus on the work they love. Through simplifying, automating and providing insights on everyday mission critical tasks for organisations of all shapes and sizes, IRIS ensures customers can look forward with certainty and confidence.
IRIS is the largest third-party online filer with the UK Government. Ninety-three of the top 100 UK accountancy firms use IRIS software. One in six of the UK's workforce is paid by IRIS payroll offerings, and globally, six million employees receive their payslip via IRIS software every month. More than 850,000 UK employees are managed by IRIS HR solutions. Over 12,000 UK schools and academies use IRIS, with four million parents and guardians using IRIS apps to connect with their children's school; 300 million messages are delivered between schools and parents each year, and over £15 million transactional payments are processed every month. IRIS is certified as a Great Place to Work® and recognised as one of The Times Top 50 Employers for Gender Equality in 2023. IRIS is also recognised as one of the Best Workplaces for Wellbeing, one of the Best Workplaces in Tech and one of the Best Workplaces for Women.
To see how IRIS helps organisations get things right first time, every time, visit www.iris.co.uk or follow IRIS Software Group on LinkedIn, Twitter and Instagram.
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