FRS 102 Preparing for Change

FRS102 changes — Irish GAAP and corporation tax implications

Generally accepted accounting practice in the Ireland (Irish GAAP) is moving closer to international accounting standards, with changes to FRS coming into effect for accounting periods beginning on or after 1 January 2026. Some of the most significant changes will see operating leases being brought on balance sheet and the introduction of new rules governing revenue recognition. 

For Irish tax purposes, these accounting changes matter because Irish taxable profits are generally computed in accordance with Irish GAAP or IFRS, subject to any adjustment required or authorised by tax law. 

As a result, changes in accounting recognition, measurement or timing may directly affect the timing of taxable income, deductible expenses, deferred tax balances, tax provisioning and corporation tax compliance positions. 

Why this matters for Irish corporation tax

Irish tax law generally starts with accounting profits and provides that taxable trading and professional profits of a company are computed in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law. 

The key changes under FRS102 may have the following tax impact:

Revenue recognition 

Where the new revenue model accelerates or defers accounting revenue, this may also accelerate or defer taxable trading income, unless a specific tax adjustment applies. Companies should review whether any transitional adjustment arises and whether the adjustment is taxable immediately or spread under applicable Irish tax rules. Further, the changes to revenue recognition could have an impact on preliminary tax payments such as that small companies may now be considered large companies (i.e. a company whose corporate tax liability is more than €200,000 in the period period) now requiring two instalments and additional work in quantifying the payments. Although this may be relatively low bar, it may still bring additional complexity, risk and planning for this additional compliance requirement to be met.

Lease accounting 

The accounting profile of lease costs may change from a straight-line rental expense to depreciation of a right-of-use asset and finance charges on the lease liability. For Irish corporation tax purposes, companies will need to consider whether the accounting expense profile remains deductible, whether tax adjustments are required, and whether the changes affect interest deductibility, EBITDA-based metrics, debt covenant calculations or transfer pricing models.

This means that the FRS102 changes may have tax consequences in three key ways:

1. Timing differences - income or expenses may be recognised earlier or later than under the previous FRS102 rules giving rise to a potential deferred tax exposure.
2. Transitional adjustments - adoption of the revised standard may create opening balance adjustments, often recognised directly in equity rather than through profit or loss.
3. Tax compliance and disclosure impacts - companies may need to explain changes in taxable profits, deferred tax balances, effective tax rates and corporation tax return positions.

Revenue guidance recognises that where accounting standards or amendments are adopted for the first time, tax rules may apply to prior period adjustments and transitional adjustments, including potential spreading treatment in certain circumstances. 

Transitional adjustments: key tax implications

On transition to the revised FRS102, companies may be required to recognise adjustments as at the date of initial application. Depending on the transition approach selected, this could involve either retrospective application or a modified retrospective approach, with adjustments recognised directly in equity. 

A key risk is assuming that an equity adjustment has no tax consequence. For Irish corporation tax purposes, the relevant question is not simply where the adjustment is booked in the accounts, but whether the underlying item represents taxable income or deductible expenditure under Irish tax principles.

Final takeaway

The FRS102 changes are not just an accounting exercise. For Irish companies, the interaction between accounting profits and taxable profits means the changes may have a direct impact on corporation tax, deferred tax, effective tax rates, tax reporting and Revenue audit readiness.

Businesses should treat the transition as a combined finance, tax and systems project. The key priority is to identify where accounting outcomes are changing, determine whether those changes affect taxable profits, and ensure that all transitional adjustments are properly documented and reflected in the Irish corporation tax computation.

Who should I contact at RSM?

To ensure your business is compliant under FRS102 and prepared for the 2026 changes, please get in touch with Sean McCarthy, James Burrows, Paddy Stapleton or your usual RSM contact.