The FRC has issued a set of Staff Education Notes related to FRS 102
The Financial Reporting Council has prepared 15 Staff Education Notes for the users of FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland.
These Staff Education Notes aim to illustrate certain requirements of FRS 102. They cover:
SEN 01 Cashflow statements
SEN 02 Debt instruments – amortised cost
SEN 03 Impairments to trade debtors
SEN 04 Investment properties
SEN 05 Property, plant and equipment
SEN 06 Leases
SEN 07 Revenue recognition
SEN 08 Government grants
SEN 09 Short-term employee benefits and termination benefits
SEN 10 Employee benefits – defined benefit plans
SEN 11 Forward exchange contracts
SEN 12 Incoming resources from non-exchange transactions
SEN 13 Transition to FRS 102 (updated April 2015)
SEN 14 Illustrative credit union financial statements
SEN 15 Acquisitions and disposals of subsidiaries
SEN 13 Transition to FRS 102 is over 14 pages and is very helpful when considering the transitional arrangements.
It contains examples on the most common areas where transitional issues may occur. These are:
An issue many are considering now is revaluation as deemed cost. While non-accounting issues like distributable profit and credit rating impact are not considered, the example highlights the accounting impact:
'Example 3 Revaluation as deemed cost
Entity C has two properties, A and B. Neither property A nor property B is an investment property. Entity C has an accounting policy to revalue its properties and to depreciate them over a useful life of 50 years.
Property A was acquired on 31 December 1980 at a cost of CU1,000 and has been revalued on a regular basis; the last time was on 31 December 2010 when its value was recorded in the financial statements at CU100,000 and its remaining useful life was 20 years.
There has been no significant change in the value of property A since that revaluation.
Property B was acquired on 31 December 2010, at a cost of CU50,000. It has never been revalued as it was purchased in the same year that the most recent valuation was carried out, and at that time its cost was the best available evidence of its valuation. There has been no impairment in its value.
On transition (1 January 2014), entity C decides not to continue its policy of revaluation as permitted by FRS 102.
Property A Paragraph 35.10(d) provides an optional exemption from restating the value of the property based on its original cost.
Therefore entity C has the following two choices in relation to property A:
If the property is restated to the original cost of CU1,000, the following adjustment would be required:
Dr Revaluation Reserve CU84,660
Dr Accumulated depreciation CU14,3402
Cr Property, plant and equipment
CU99,000 Property B
No adjustment is required on transition for Property B3.
The guidance is available from the 'Related links' section on this page.