The Hospitality sector is about to go through some pretty big accounting changes, with the 2026 amendments to FRS 102 due to shake up how hotels, restaurants, pubs and leisure businesses report their finances.
Many CFOs and Finance Teams are seeking clarity on how the FRC’s Periodic Review will affect reporting for periods commencing on or after 1 January 2026. For the Hospitality sector – where leases, incentives, and group arrangements often feature heavily – the changes are expected to have a significant impact on balance sheets, KPIs such as EBITDA, and performance metrics.
Below, we break down some of the key changes you and your finance teams need to be aware of.
FRS 102 – lease accounting changes
- Most leases must now be recognised on the balance sheet, subject to limited exceptions.
- Comparatives will not be restated; instead, the cumulative impact will be recorded as an adjustment to opening retained earnings.
- Lease incentives should reduce the Right‑of‑Use asset and no longer form part of the lease liability calculation.
- For existing leases, the present value of remaining payments should be calculated using the incremental borrowing rate available at the date of initial application.
There are lots of things to consider here, such as variable lease payments, intra‑group leases, and capital contributions, highlighting the practical challenges finance teams should expect.
You can read more on lease accounting here.
Company law updates
New regulations increasing company size thresholds came into effect on 6 April 2025, affecting both narrative reporting and audit requirements. Interestingly, one of the ICAEW Helpline’s most common queries still relates to determining the correct size classification!
Key points to consider:
- Companies should assess both the current and prior year against the new thresholds. If a company does not breach the thresholds for two consecutive years, it can continue to apply small company exemptions.
- Many small companies may now fall within the scope for audit exemption, but remember:
- In a group situation, the whole group must be small to qualify.
- When considering audit exemptions, the entire group, not just the UK elements, must be considered.
- Finance teams may wish to consider whether s479 subsidiary audit exemptions, using parent company guarantees, could be beneficial.
- Importantly, thresholds have not changed for SECR or the Failure to Prevent Fraud legislation. Companies should continue to assess their size against the relevant thresholds to confirm reporting obligations.
Ethics reminder
Most accounting professionals are familiar with the ICAEW Code of Ethics but may not be aware that the July 2025 update introduced new emphasis on professional behaviour, mindset, and technology. Now may be a good moment to review your online presence to ensure your personal and professional profiles remain clear and consistent.
Need further guidance?
We’re here to help. Get in touch with our Hospitality Team today for bite-sized advice, without the jargon. Contact Rupinder Bajwa, Senior Hospitality Manager, with any of your burning questions.
