Transitioning to FRS 102 can be complex, especially when managing large lease portfolios and ensuring audit readiness.  Although FRS 102 is a UK standard, its lease accounting requirements to be introduced post January 2026 closely align with US GAAP under ASC 842, as both frameworks share foundational principles—most notably, the recognition of leases on the balance sheet. For companies with substantial lease portfolios, achieving audit readiness under these standards will demand significant preparation and strategic planning.

One leading distributor of building supplies across the United States faced this challenge head-on. Having grown rapidly—both organically and through acquisitions—the company saw annual sales surge from $3 billion in 2019 to more than $9 billion in 2023. With thousands of leases across its nationwide network of distribution centers and undiscounted lease liabilities exceeding $700 million, the company needed a clear, structured path to compliance under new accounting standards.

Challenges

As the organization expanded, it faced a dual transition: adopting new revenue recognition standards under Topic 606 and lease accounting under ASC 842 (similar to the requirement under FRS 102, Section 20). Managing compliance across such a vast and growing footprint presented several key challenges:

• Identify and catalogue all existing leases, many of which were embedded in service and procurement contracts.
• Ensure accurate financial reporting and compliance with new standards.
• Prepare for audits by Big Four firms, with the risk of non-compliance impacting debt covenants and access to funding.
• Educate stakeholders across the organization, including regional managers whose compensation was tied to KPIs affected by the new standards.

These challenges threatened operational efficiency, financial health and strategic goals, including maintaining lender confidence and regulatory compliance.

FD’s Approach

Strategy

Frazier & Deeter (FD) implemented a comprehensive strategy to address the client’s challenges:

1. Stakeholder Education & Training: Conducted workshops and training sessions for financial reporting teams and other stakeholders, ensuring everyone understood the impact of the new standards and their roles in compliance.
2. Discovery & Data Collection: Led a detailed discovery process to identify leases, abstract key terms and cleanse the data to ensure accuracy.
3. Process & Template Development: Created standardized templates for lease abstraction and reporting, enabling consistent review and documentation.
4. Software Implementation: Assisted in selecting and implementing Costar, a robust lease management software platform tailored to their needs.
5. Policy Drafting: Drafted accounting policies, including discount rate selection, transition elections and memos.
6. Audit Preparation: Ensured the organization was fully audit-ready, facilitating a smooth review by Big Four auditors and receiving unsolicited positive feedback for making the audit process easier.

Service Focus

These services solved the core problem of compliance, streamlined lease management, and ensured accurate financial reporting.

The Outcome

Quantitative Results

• The organization successfully transitioned to new standards, with thousands of leases accurately catalogued and reported.
• Lease liabilities exceeding $700 million were properly capitalized and presented on the balance sheet.
• The audit process was significantly streamlined, with Big Four auditors reporting no findings or adjustments and commending FD’s work for making their jobs easier.

Long-Term Impact

• The organization is now compliant with ASC 842 (similar to UK FRS 102), reducing financial reporting risk.   
• The organization has established robust processes for ongoing lease management and financial reporting, ensuring future compliance and operational efficiency.
• Stakeholders across the organization are educated and engaged, minimizing disruption and aligning compensation structures with new reporting requirements.
• The organization’s ability to access capital and maintain investor confidence is strengthened by transparent, accurate financial statements.

Ready to simplify your FRS 102 transition?

FD’s proven expertise in working with small and large-scale lease accounting transformations ensures accuracy, compliance and peace of mind. Whether you’re navigating FRS 102 or preparing for future regulatory changes, we can help you get there with confidence.

 Contact us today to discuss your transition strategy.

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