Revision to the SORP (FRS 102): Update for social housing providers

The Financial Reporting Standard (FRS) 102 is subject to a periodic review at least every five years, and the latest periodic review was completed in March 2024.

The revised FRS 102 is applicable for accounting periods commencing on or after 1 January 2026.   

Following the periodic review, the Housing Statement of Recommended Practice (SORP) is being updated. We are expecting the revised Housing SORP to be applicable from the same period, though there are no details yet from the Housing SORP working party as to the timeline for the release of the SORP Exposure Draft, consultation on the planned changes and then the release of the revised SORP.  As many housing providers have a March year end, the first accounting period under the revised SORP is expected to be 31 March 2027. 

Key changes of FRS 102

It is already known that the key changes of FRS 102 will flow into the revised SORP and these relate to:

• Revenue recognition, based on IFRS 15 Revenue from Contracts with Customers and its five-step model for revenue recognition; and 
• Lease accounting, which will bring the majority of leases onto the balance sheet, which is in line with IFRS 16 Leases. 

In preparation for these changes, what can housing providers do now?  There are some questions that you can start asking to prepare:

Revenue 

• Do you have any revenue contracts that include multiple goods/services?  If so, these will need to be unbundled and if you have different contract terms for different customers, you will need to make sure that the right revenue recognition policy is applied to each customer. 
• Does your finance team understand the five-step model and which of your revenue streams will be impacted? 

Leases 

• Does your housing association have operating leases? 
• Do you have copies of all of your lease agreements? 
• Does your finance team understand the adjustments that will be required? 
• What will be the impact on any loan covenants of bringing the operating leases onto the balance sheet?

Our FRS 102 webinar hosted on 16 May covered these topics and, though it was written with corporate entities in mind, would still be a helpful guide for housing associations. 

If you have any questions about FRS 102 and how it may impact your housing association, please contact Lucy Hammond or Coral Curtis