This Content Was Last Updated on February 10, 2017 by Jessica Garbett


Businesses advised to prepare now ahead of the 1 January 2014 transition date.

For entities with a 31 December year end that are not planning to adopt FRS 102 early, the transition date is 1 January 2014. This date is now looming on the horizon and entities should start planning for the transition to FRS 102 now.

Section 35 of the new standard is dedicated to transition. This section applies to ALL first time adopters, regardless of which GAAP they were previously using, and also if it is their first ever set of accounts.

The transition date procedures in the opening balance sheet (‘statement of financial position’) should be as follows:

  • recognise all assets and liabilities whose recognition is required by the FRS
  • not recognise items as assets or liabilities if the FRS does not permit such recognition
  • re-classify items that were recognised under the  previous financial reporting framework as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity under the FRS
  • apply the FRS in measuring all recognised assets and liabilities.

There are some exceptions to these general provisions. First, the standard sets out those transactions where the accounting followed under ‘old’ GAAP should not be retrospectively changed:

  • de-recognition of financial assets and financial liabilities
  • hedge accounting
  • accounting estimates
  • discontinued operations; and
  • measuring non-controlling interests.

The standard goes into more detail about three of these. Financial assets and liabilities de-recognised under pre-FRS 102 GAAP before the transition date shall not be recognised on first time adoption. Though where they would have been de-recognised under FRS 102 in a transaction that took place before transition but were not de-recognised under old GAAP, there is a choice to de-recognise them on adoption or to continue to recognise them until disposed of.

In relation to hedge accounting, the provisions in FRS 102 shall be applied to hedging relationships in existence at the date of transition, while the entity shall make no adjustment for hedging relationships that no longer exist at the date of transition.

When measuring non-controlling interests, the requirements to allocate profit or loss and total comprehensive income between non-controlling interests and owners of the parent – for accounting for changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control – and for accounting for a loss of control over a subsidiary, shall all be applied prospectively from transition date.

There are also some exemptions that an entity may choose to apply at the transition date, and these relate to the following areas:

  • business combinations, including group reconstructions
  • share-based payment transactions
  • fair value or revaluation as deemed cost of fixed assets
  • individual and separate financial statements
  • compound financial instruments
  • service concession arrangements – accounting by operators
  • extractive activities
  • arrangements containing a lease
  • decommissioning liabilities included in the cost of property, plant and equipment
  • dormant companies
  • deferred development costs as a deemed cost
  • borrowing costs
  • lease incentives
  • public benefit entity combinations
  • assets and liabilities of subsidiaries, associates and joint ventures
  • designation of previously recognised financial instruments.

An example of the type of exemption available under this section of the standard is that, at the date of transition, fixed assets may be measured at fair value and that fair value be treated as deemed cost at that date, or a previous GAAP revaluation may be used as deemed cost at the transition date.

Section 35.10 of the standard contains more details about the other choices entities have in relation to these exemptions.

The last available exception to the general provisions relating to transition is set out in paragraph 35.11 of the standard. It states that if it is impracticable for an entity to re-state the opening balance sheet at the transition date for any of the adjustments required under section 35, then the entity shall apply the appropriate paragraphs in the earliest period for which it is practicable to do so.

Furthermore, if it is impracticable to provide any disclosures required by FRS 102 for any period before the period in which an entity prepares its first financial statements that conform to the standard, the omission shall be disclosed.

Disclosure of how the transition to the FRS has affected the entity’s financial position is also required, together with reconciliations of equity and profit or loss determined in accordance with the previous accounting framework at the date of transition to equity and profit or loss as determined in accordance with FRS 102.

View the new UK GAAP accounting standards on ACCA’s website.

Further guidance on the future of UK GAAP is also available.

Article contributed by ACCA