As previously reported changes are coming to FRS 102 for accounting periods beginning on or after 1 January 2026. For most Credit Unions this will impact their 30 September 2027 year end accounts.
This article looks at the change to revenue recognition. The changes will not impact interest on loans or bank interest which are still accounted for as before.
5 Step Revenue Recognition Model
Once implemented, any contract income and fees will need to follow the new 5 step revenue recognition.
Â
- Step 1: Identify the contract with customers– This involves looking at all current agreements, including explicit and implicit contractual terms and whether it falls within the new rules.
- Step 2: Identify performance obligations – The new standard defines what classes as a performance obligation and the contracts will need reviewed to sperate the contract into its elements.
- Step 3: Determine transaction price – Complications can arise where there is variable elements and the new rules provide guidance in this area.
- Step 4: Allocate transaction price – The total transaction price requires then to be allocated to each performance obligation.
- Step 5: Recognise revenue when meet performance obligations – The new standard details whether revenue should be recognised over time or at fixed point.
Transition to new approach
There are two options for implementing the new rules:
- Full retrospective application involving restating the comparative figure.
- Modified retrospective application – Comparatives are not restated and any cumulative effect is presented as an adjustment to opening balances at the start of the first year under the new rules.
Impact on Credit Unions
The new rules are more comprehensive and prescriptive than what was previously within FRS 102. This may impact when revenue is recognized. One example will be where the Credit Union has contracts for services with councils or housing associations. The Credit Union will need to review each of these contracts and consider how revenue should be recongised under the new rules.
For Credit Unions the main issue for revenue recognition will likely to be with regards to joining fees. Currently they are recognized when received. Under the new rules, unfortunately, these may be required to be spread over the membership period for the member. Its worth discussing this with your auditor.
We plan to cover this topic in more detail during our forthcoming free webinar which will be held on 23 April 2026 at 2pm. You can register by clicking here.