Company Accounts Changes: Agriculture

18th June 2026

For any Companies preparing accounts under Accounting Standard FRS102 (including the provisions of section 1a) changes are coming for accounting periods beginning on or after 1st January 2026 in respect of operating lease recognition. This only impacts Companies, and only those using FRS102, not those using FRS105 for micro entities.

The changes require company accounts to recognise a lease liability and right of use asset for any previous leases that were considered off-balance sheet. This essentially puts all leases on the balance sheet that might have previously been expensed to the profit and loss account, increasing assets but also liabilities.

For some, this is simply going to be an accounting issue for their advisors to deal with, but for others it does have wider implications. For companies with borrowing that lenders have placed debt serviceability and other restrictions on, this will increase the company’s gearing ratio and worsen their interest cover (sometimes referred to as debt serviceability). For some others, it might also mean that assets are now too large to claim audit exemption.

Fortunately, it would seem that lenders have picked up this point and are re-calculating their metrics for new finance, but it is unclear whether loans that are already in place will have their metrics updated as well.

Hopefully it goes without saying, but good relationships with lenders are key. If you think your company is going to be affected by this change, it’s probably wise to have a quick call with your lenders sooner rather than later to see where you stand.