Income counts when you deliver, not when you invoice.
FRS 102 is the rulebook most private companies in Ireland and the UK use for their accounts. Section 23 is the chapter on revenue — when money from customers can be counted as income. The Financial Reporting Council has replaced it in full, for accounting periods beginning on or after 1 January 2026.
The new version works through five steps, adapted from IFRS 15, the standard large international companies already use. The idea underneath is simple: you count income as you deliver what you promised the customer. In practice, a lot of small companies simply booked income on the day they invoiced. Where customers pay in advance for something delivered over time, that no longer works.
Your cash doesn't change. What changes is which year the income lands in — and so the profit for each year. Not sure whether that's you? Take the one-minute check.
A €12,000 annual subscription, paid up front.
A customer signs up in July and pays for the full year. The company's year ends on 31 December.
| How many small companies booked it | Under the new Section 23 | |
|---|---|---|
| July, when paid | €12,000 of income | €1,000 of income. The other €11,000 is deferred income — received, but not yet earned. |
| Each month after | Nothing | €1,000 released from deferred income as the service is delivered |
| Income for the year to 31 December | €12,000 | €6,000 — the other €6,000 belongs to next year |
| Cash in the bank | €12,000 | €12,000 — unchanged |
Spread evenly by month to keep the numbers simple; in practice it's usually worked out by day.
The five steps.
Each step feeds the next. For a simple subscription they take seconds; for a bundled contract they're where the work is.
Almost every Irish and UK company.
✓ In scope
- Companies preparing accounts under FRS 102 — in Ireland and the UK
- Small companies using the Section 1A version of FRS 102
- Accounting periods beginning on or after 1 January 2026
- Every contract still running when your first affected year starts
✕ Different rules
- Companies reporting under IFRS — already on IFRS 15, so nothing changes
- Micro-entities on FRS 105 — a simplified version of the same model applies from 1 January 2026, with its own switchover rules
When it starts for you
If your year ends on 31 December, your first affected year is the one ending 31 December 2026. For any other year end, it's the first year that starts during 2026 — so a 31 March year end is first affected in the year to 31 March 2027. The accounts are prepared later, but the figures are being set by contracts running now.
Who notices most
- Subscriptions and memberships paid monthly in advance or annually up front
- Software, maintenance and support contracts
- Retainers and deposits for work that runs across a year end
- Anything sold as a bundle — setup plus subscription, equipment plus installation, product plus support
- Long projects billed in stages that don't line up with the work
Are you affected?
Six questions. Your answers stay in your browser.
Which accounting rules are your company's accounts prepared under?
It's stated near the start of the notes to your last set of accounts. Most small and medium private companies in Ireland and the UK use FRS 102, often the Section 1A small-company version.
A one-off adjustment, done once.
When you move to the new rules, some contracts will be half-finished. Take that July subscription again: under the old habit all €12,000 was counted in the first year, but under the new rules half of it belongs to the second.
Past years are closed, so they aren't reopened. Instead there is one correcting entry on the first day of the first affected year. It moves the unearned part out of retained earnings — the running total of past profits — and back into deferred income, so it can be counted properly as it's delivered. The accounts then carry a note explaining the change.
Modified retrospective
The simpler route, and the usual choice for smaller companies. Last year's figures stay as they were. The whole effect goes through retained earnings at the start of the year, and the accounts explain how this year's income differs from the old rules. Only contracts still running at the switchover are adjusted.
Full retrospective
Last year's figures are restated as if the new rules had always applied, so the two years compare like for like. More work, and sometimes worth it — for example when investors or lenders will be comparing the years closely.
Try it with your own numbers.
Change the amount, your year end and when the contract started, and watch the adjustment and the journal follow.
| Income | The old way | Where the new rules put it |
|---|---|---|
| Year to 31 December 2025 | €12,000.00 | €6,000.00 |
| Year to 31 December 2026 | €0.00 | €6,000.00 |
| Account | Debit | Credit |
|---|---|---|
| Retained earnings | €6,000.00 | |
| Deferred income | €6,000.00 |
Illustrative only: one annual contract paid up front, spread evenly by month, using the modified retrospective approach. Real contracts are rarely this tidy — bundles, upgrades, refunds and how income was actually booked all change the answer, and the tax effect isn't shown.
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Run it on your real contracts →Your Section 23 switchover, for a fixed fee.
A fixed fee per company, agreed before we start. No hourly billing and no surprise invoices.
- ✓A review of your customer contracts and how income has been booked until now
- ✓Old-rules versus new-rules figures, contract by contract
- ✓Advice on which switchover method suits your company, and why
- ✓The one-off retained earnings adjustment and its journal, reconciled to your trial balance and reviewed with you before anything goes into Xero or QuickBooks
- ✓A draft of the note your accounts need, explaining the change and its effect on the year
- ✓Deferred income worked out every month from then on, so year end brings no surprises
Section 23 questions.
What is FRS 102 Section 23?
Section 23 is the part of FRS 102 that sets out when a company recognises revenue from its customers. It has been replaced in full, for accounting periods beginning on or after 1 January 2026, by a five-step model adapted from IFRS 15: income is recognised as the company delivers what it promised, rather than when an invoice is raised.
When do the new Section 23 rules apply?
For accounting periods beginning on or after 1 January 2026. For a company with a 31 December year end, the first affected year is the one ending 31 December 2026. For other year ends it is the first year that starts during 2026, so a 31 March year end is first affected in the year to 31 March 2027. Early adoption is permitted.
Do the changes apply to small companies?
Yes. They apply to all companies preparing accounts under FRS 102, including small companies using Section 1A, in both Ireland and the UK.
What about micro-entities using FRS 105?
FRS 105 moves to a simplified version of the same five-step model for accounting periods beginning on or after 1 January 2026, with its own, simpler switchover rules. It is worth checking how those apply to the contracts you already have.
Will Section 23 change my tax bill?
It can change which year profit falls into, which can change when tax is paid, and the one-off switchover adjustment can have tax consequences of its own. The cash your business receives is unchanged. The tax position depends on your circumstances and is worth planning before your first affected year end.
What is the difference between the modified and full retrospective approaches?
Under the modified retrospective approach, last year's figures are left as they were and the cumulative effect of the change is recorded as an adjustment to retained earnings at the start of the first affected year, for contracts not completed at that date. Under the full retrospective approach, last year's figures are restated as if the new rules had always applied. Most smaller companies choose the modified approach.
We invoice after we deliver. Are we affected?
Probably very little. The new rules mostly move income that is paid for in advance of delivery. If you invoice after the work is done and little runs across your year end, your figures may barely change, though bundled sales and long projects are still worth checking.
Keep reading.
Not sure how Section 23 lands for you?
Send us your largest customer contracts and last year's accounts. Thirty minutes, no charge, and a straight answer on whether it's worth doing anything.
Correct as of September 2026, based on the amendments to FRS 102 and FRS 105 issued by the Financial Reporting Council, effective for accounting periods beginning on or after 1 January 2026. This page is general information, not advice for your specific circumstances.