FRS 102 finance review

Six isolated examples share the same £1,000 monthly rent in arrears and a 6% effective annual rate, so the term, an initial six-month rent-free period and a two-year tenant break are the only differences. Choose one; every section below updates.

Independent tie-out checks

Recalculated outside the monthly schedule each time the page loads, and covered by automated tests. Lifetime totals allow up to £0.01 per month of display rounding.

• Pass

  Opening liability agrees to an independent discounting of every dated payment

  Expected £32,955.15 · engine £32,955.15

• Pass

  Lifetime interest = total payments − opening liability (within penny rounding)

  Expected £3,044.85 · engine £3,044.86

• Pass

  Lifetime depreciation = opening right-of-use asset (within penny rounding)

  Expected £32,955.15 · engine £32,955.28

• Pass

  Liability and asset both close at nil at lease end

  Expected £0.00 · engine £0.00

• Pass

  Every monthly journal balances (36 months)

Decisions awaiting the finance director

Selected: 3 years · standard

Starts 1 January 2027; exclusive end 2030-01-01. The property is available for use from commencement. The first £1,000 payment is due 31 January 2027. No options, other incentives, costs, provisions, subleases or tax entries apply.

Recognition — 20.46–20.50

PV = Σ (scheduled payment ÷ 1.06^(days to each payment / 365)) = £32,955.15
ROU = liability + prepayments + eligible costs + restoration − incentives = £32,955.15

January calculation — event by event

Full precision is retained in calculations; presentation and journal lines round to pennies. Adding displayed amounts can differ by £0.01 from a displayed closing balance. Month-end interest includes accrual after an early/last-day payment; it is not simply opening liability × a fixed monthly rate.

These are the actual January lines generated for the selected 3 years · standard example. Account numbers are EstateOS defaults, not prescribed by FRS 102. Confirm your chart-of-accounts mappings and posting boundaries with finance.

Other journal families — how amounts are formed

The transition entry is not a fixed debit/credit template: the signed balancing amount determines whether retained earnings is debited or credited. Variable and exempt rent currently credit accruals. Impairment currently credits ROU accumulated depreciation. Specialist journals are differences between cumulative measurements at successive period ends, not repeated postings of their full balances.

31 December 2027 — worked-example outputs

Every year of the selected lease

All examples side by side

Required evidence: recognition date, reasonably certain term, chosen rate type, a supportable lender quote or borrowing assessment, preparer/reviewer and approved policy version. Finance and Johnston Carmichael must approve both the methodology and actual rates before live use.

1. 01

   Gather validated inputs

   Lease dates, rent, frequency, options, incentives, fees and provisions are read from lease and workbench records. Finance must validate completeness; not every input has a separate approval gate.

   20.37–20.44, 20.46–20.48

2. 02

   Scope and exemptions

   Each lease is tested for the short-term exemption; property can never be treated as low value. Holding-over leases stay on the balance sheet.

   20.8–20.12

3. 03

   Build the cash flows

   Dated payments in advance or arrears, rent-free periods, stepped rents, purchase options, guarantees and break penalties form the payment schedule.

   20.51–20.52

4. 04

   Discount and recognise

   Payments are discounted at the lease's approved rate type to give the liability; the right-of-use asset adds premiums, fees and restoration costs, less incentives.

   20.46–20.50

5. 05

   Run each month

   Interest accrues on the liability, payments reduce it, the asset depreciates over the right period and dilapidations provisions unwind to finance cost.

   20.53–20.58, 21.11

6. 06

   Apply changes in date order

   Reassessments and modifications remeasure at the rate the standard requires, with gains or losses on partial surrenders; the database refuses the wrong rate.

   20.65–20.73

7. 07

   Specialist measurements

   Impairment, subleases, investment property transfers, sale and leaseback and deferred tax versions post their own journals as period movements.

   20.59–20.60, 20.86–20.126, 29

8. 08

   Post balanced journals

   Monthly journals are generated by account; ERP posting needs configured mappings and a live connection. Close snapshots preserve results and journal evidence.

   Close controls

9. 09

   Produce the reporting

   Current and non-current split, asset note by class, period amounts, maturity bands, cash-flow split, transition reconciliation and the draft disclosure note.

   20.74–20.83, 1.44–1.57, Section 7

Preparer → independent reviewer → locked evidence → ERP

Property supplies the signed contract; finance validates inputs and prepares the calculation. A different authorised finance user reviews specialist measurements, policy and the close. Outstanding specialist measurements and close controls must be resolved. The reviewer locks the period, preserving results and journal lines. ERP mapping and delivery are separate controls: a locked close is not proof of successful ERP posting.

Shared store and lease identifiers connect the records. Database access rules and audit triggers protect the history. Ordinary input fields still need a finance completeness check; the existence of a record does not mean it has been approved.

1. 1 · Lease accounting / FRS 102 workbench

   Set the expected payments

   Each lease's dated payment lines, rent steps and rent-free periods define what is contractually due, and this drives the liability and the payment journal.

2. 2 · Financial control → Payment schedules

   Run the payment calendar

   Rent, service charge and rates are scheduled per store with due dates, so finance sees every payment due within 30 days.

3. 3 · Financial control → Invoice matching

   Match each invoice

   Landlord invoices are matched to the expected payment; anything outside tolerance becomes an exception needing a named finance approval before export.

4. 4 · Lease accounting close / ERP

   Close and reconcile

   The month close posts the balanced journals and locks the period. Scheduled amounts are not confirmed bank payments. Finance must reconcile journals to invoices and actual cash in the ERP before posting.

Contractual lease payments and the financial-control payment calendar are distinct records, not a bank feed. Invoices and cash payments do not automatically replace the engine’s dated inputs. Finance must check those records agree, exclude inappropriate non-lease components and avoid double posting rent through both accounts payable and the lease journal.

Recommended next examples for full reporting and validation

These are recommended additions to the public review, not additional worked examples delivered here. The six comparisons validate core term and rent-free handling, not every disclosure or specialist rule.

For each additional example: retain agreed inputs, an independent expected calculation, all monthly journals, annual disclosures, an explained variance log and reviewer sign-off. Test calculations and actual two-person save/approve/close/export workflows separately.

Specialist workflow extensions

Finance director / accountant approval checklist

• Confirm the real lease book, signed documents and exact payments are complete and agree to the accounting ledger.
• Approve term judgements, component allocation, rate evidence, useful life and transition elections.
• Approve the payment posting design, creditor/bank mapping and controls to prevent invoice/journal duplication.
• Compare the example and real Jan–Mar 2026 closes to independently approved spreadsheet calculations; investigate and own variances.
• Use a second authorised finance reviewer for policy, specialist measurements and close approval.
• Retain locked close snapshots, rate evidence, reconciliation, journal export, disclosure note and specialist schedules for Johnston Carmichael.
• Tax advisers validate tax inputs; finance reconciles actual cash and signs off final statutory disclosures. ERP and email need live connections before reliance.

This review describes implemented handling and a reproducible illustrative case, not certification of full company-wide compliance. Accounting judgements, actual data, final disclosures and auditor acceptance remain external approval requirements. The current gap analysis is the review register.