How can football clubs prepare for the new FRS 102 accounting rules?
The biggest change to UK GAAP in a decade is about to hit sports organisations, and while cash won’t change, the numbers in the accounts almost certainly will.
For businesses with accounting periods beginning on or after 1 January 2026, amendments to FRS 102 will soon come into force, requiring early planning, specialist support and careful review of existing accounting approaches. Designed to align UK GAAP more closely with IFRS 15 and 16, the changes will affect some organisations more than others, and football clubs and governing bodies in particular will need to plan carefully for the impact on their reporting, contracts and financial structures.
This article outlines the main effects of FRS 102 that clubs should prepare for, focusing on income recognition, lease accounting, disclosures and related party reporting. Using practical examples and actionable steps, our experts aim to address club management teams’ concerns and help them prepare effectively.
Why will income look different under the new FRS 102?
FRS 102 is introducing a new five-step revenue model, which will require income to be recognised as and when it meets performance obligations. Entities must be able to:
- Identify distinct promises: Splitting the contract into separate components.
- Allocate the transaction price: Assigning value to each promise.
- Show a right to payment: Needed to recognise income over time.
Fortunately, this revised model will not impact all forms of income; revenue derived from ticket sales, broadcasting, and retail activities will continue to be recognised in the same way as before. It will, however, significantly alter the treatment of bundled commercial agreements, which often encompass multiple performance obligations such as branding, hospitality, digital rights, and appearances.
Consider the following example which demonstrates how a football club might respond to these changes:
Price Bailey FC have a three-year partnership with Freshdrop Juice. Their agreement includes front-of-shirt branding, LED, digital content, hospitality boxes, and player appearances, making up a total contract value of £5 million over three years.
Old approach:
Price Bailey FC previously recorded this income in full as sponsorship revenue, reporting £1.6 million annually.
New approach:
At the end of the next financial year, Price Bailey FC must identify the separate performance obligations within the contract and allocate value to each (front-of-shirt branding, led, digital content, hospitality boxes, player appearances). They will then recognise revenue as and when those promises are delivered.
As a result, revenue on the profit and loss statement may fluctuate from season to season, depending on how each feature is used, and will only be recognised after a particular match or event.
Disclaimer: Price Bailey FC and Freshdrop Juice are fictional and used for illustration; any resemblance to real clubs or organisations is coincidental.
How does this affect profit & sustainability rules in each competition?
Premier League – PSR and SCR
- In the Premier League, the current Profit and Sustainability Rules (PSR) focus on three-year profitability, while the new Squad Cost Ratio (SCR) will cap squads as a percentage of football-related revenue. Changes in when commercial income is recognised under FRS 102 can therefore affect both the reported profit profile over three seasons and the revenue base used for SCR calculations, even if the underlying contracts and cash flow remain the same.
EFL Championship – Rolling loss limits
- In the Championship, profitability and sustainability rules similarly assess clubs using rolling, multi-year loss limits based on audited accounts. If sponsorship and hospitality deals now generate more irregular reported revenue from year to year, clubs could see headroom against those loss limits move around purely because of accounting timing, making it important to model key contracts on the new basis when planning transfer budgets and risk monitoring.
League One and League Two – Wages as a share of turnover
- In Leagues One and Two, the emphasis is on player wages as a percentage of turnover. Here, the critical link is the denominator: if FRS 102 pushes more commercial income into later periods, reported turnover may fall in the short term, tightening the wage‑to‑turnover ratio and reducing room to manoeuvre on player costs, even where headline sponsorship values have not changed. Finance teams will therefore want to understand how the new model re‑profiles relevant turnover before setting wage budgets and making recruitment decisions.
How will leases now appear on the balance sheet?
Under amended Section 20, lessees can no longer differentiate between operating and finance leases, meaning almost all of them must now come onto the balance sheet as a right-of-use (ROU) asset and a lease liability.
The only two exemptions are:
1. Short-term leases (lease terms of 12 months or less without purchase option).
2. Leases of low value assets like electronics of furniture.
For football clubs, the impact is clear: where stadiums or training-ground leases were previously classified as operating leases, they will now need to be recognised on the balance sheet as ROU assets and lease liabilities.
To illustrate this in practice, let’s revisit the previous example:
Price Bailey FC have a training-ground lease at £20,000 a month over a five-year term (£1.2 million in total).
Old approach: The £20,000 was recorded on the P&L account as rent, reducing profit and EBITDA.
New approach: The club must now recognise the lease as an ROU asset and lease liability upfront. Each month, the P&L will show depreciation of the ROU asset and interest on the lease liability, rather than straight-line rent. The accounting cost in early years is likely to be higher than the old rent figure, not because cash has changed but because the interest charge will be at its highest at the start of the lease.
Financial implications
Although cash flows remain unchanged, changes in leverage and EBITDA can still affect available headroom. Under the old model, rent sat in operating expenses and reduced EBITDA; now, with no separate rent line that metric can increase. This is particularly beneficial for those with EBITDA-based loan covenants. However, lease liabilities also increase reported net debt, potentially affecting debt‑to‑equity ratios, interest cover and how clubs appear under league financial rules. Clubs should speak to lenders early to mitigate the risk of technical covenant breaches.
How do the transition and comparatives work?
On transition, lessees do not restate comparatives; instead, they recognise the cumulative effect as an adjustment to opening reserves at the date of initial application. The lease liability at that date is measured as the present value of remaining lease payments using the lessee’s incremental or obtainable borrowing rate. The ROU asset is typically set equal to the lease liability, adjusted for any prepaid or accrued amounts, so clubs effectively start fresh with on-balance-sheet leases on day one of the new standard.
What’s changing around disclosures and related party reporting?
The new FRS 102 framework will require more detailed disclosures. This includes expanded notes around key judgements and estimates, lease commitments, and how major revenue streams are structured. Simultaneously, the small‑entity exemption that allowed some related-party transactions to be omitted is being removed, meaning small entities will now have to apply the full related‑party disclosure requirements. Material transactions must be disclosed with the nature of the relationship, transaction amounts, outstanding balances, key terms and any guarantees or commitments.
For professional clubs that depend on owner or related‑party funding, these arrangements will need to be more clearly and consistently described in the notes, even where they are on arm’s‑length terms. Such transparency may lead to heightened scrutiny from regulators, lenders and supporters.
How these changes would look in practice:
Old approach: Price Bailey FC previously kept things high level. Their £5m owner line was represented as a single line within creditors, and their training-ground lease, guaranteed by a director, was not linked to that individual in the notes.
New approach: Price Bailey FC must now spell these out clearly. The £5m owner loan will require a note explaining that it comes from a related party, with the interest rate, repayment terms and any security. The director guarantee of the training-ground lease must also be disclosed as a related party transaction.
When should football clubs start preparing?
For clubs with 31 May or 30 June year ends, the changes will apply from the 2026/27 season. Although there is a nine-month window after year end to submit reports, it is essential to implement the changes from day one so that everything can be accurately tracked.
For example:
If Price Bailey FC starts its new season and financial year on 1 July 2026, the way it records lease data and structures sponsorship deals from that date must reflect the new FRS 102 framework.
In the meantime, clubs can start implementing the following actions to get ready for what comes next:
Income recognition
- Review top sponsorship, hospitality and media contracts and list the separate performance obligations for each.
- Map how those contracts are currently recognised versus how they will look under the new model, highlighting where revenue will move between seasons.
- Agree a standard way for commercial and finance teams to document performance obligations and standalone values whenever a new deal is signed.
Leases
- Build a complete lease register covering stadium, training ground, other facilities, vehicles, equipment and IT, including key terms, options and renewal clauses.
- Determine which leases will come on balance sheet and model ROU assets, lease liabilities and P&L impact over the lease terms.
- Test the impact on key metrics such as EBITDA, net debt (including leases), leverage ratios, interest cover and compare against any bank covenants or league financial rules.
- Speak with lenders early to mitigate the risk of technical covenant breaches.
Related parties and disclosures
- List all funding and commercial relationships with owners, directors and connected companies (loans, guarantees, sponsorships, service contracts).
- Assess which of these will require fuller related party disclosure under the updated rules, and draft example note wording so there are no surprises at year end.
- Review your wider note requirements (judgements, estimates, lease information, revenue breakdowns) and decide what additional data you’ll need to collect during the first affected season, rather than trying to reconstruct it afterwards.
Closing thoughts
The upcoming FRS 102 changes won’t affect the underlying cash position of football clubs, but they will affect how performance, leverage and profitability appear in the accounts. For organisations already operating under financial, regulatory or covenant pressure, the real risk lies in leaving preparation too late, and discovering the impact only once a season is already underway.
A focused review ahead of implementation can help clubs understand where income timing may shift, how leases will reshape the balance sheet, and what the knock-on effects could be for EBITDA, sustainability regulations and lender discussions.
How can Price Bailey help?
We work with sports organisations and governing bodies to carry out FRS 102 impact reviews, helping clubs to understand how changes will affect their reporting and key metrics.
If you’d like to discuss how the changes may affect your club, or wish for clarity before the new season starts, our sports accounting specialists would be happy to help. Fill in the form below to start an initial conversation.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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