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Contents
35.2 First-time adoption – Extract from FRS102: Section 35.3-35.6.
35.2.1.2 Illustration of transition dates.
35.2.1.3 Complete set of financial statements.
35.2.1.4 Statement of compliance and statement that these are first set under FRS 102.
35.2.1.5 Disclosure where an entity is applying the reduced disclosure framework.
35.3 Procedures for preparing financial statements at the date of transition.
35.3.1 Extract from FRS102: Section 35.7-35.8.
35.3.2.2 Practical adjustments on transition to FRS 102.
35.4 Mandatory exceptions to retrospective application – derecognition.
35.4.1 Extract from FRS102: Section 35.9(a).
35.4.2.1 Derecognition defined.
35.5 Mandatory exceptions to retrospective application – accounting estimates.
35.5.1 Extract from FRS102: Section 35.9(c)
35.5.2.1 Non retrospective adjustment account estimates.
35.5.2.2 Retrospective adjustments to a prior period material error.
35.6 Mandatory exceptions to retrospective application – discontinued operations.
35.6.1 Extract from FRS102: Section 35.9(d).
35.7 Mandatory exceptions to retrospective application – non-controlling interest.
35.7.1 Extract from FRS102: Section 35.9(e).
35.8 Optional exemptions – business combinations.
35.8.1 Extract from FRS102: Section 35.10(a).
35.8.2.2 Possible adjustments even where the exmption is claimed – deferred tax.
35.8.2.3 Adjustments to business combinations where it occurs after the date of transition.
35.9 Optional exemptions – Share based payment transactions.
35.9.1 Extract from FRS102: Section 35.10(b).
35.10 Optional exemptions – Fair value or revaluation as deemed cost.
35.10.1 Extract from FRS102: Section 35.10(c) and Section 35.10(d).
35.10.2.2 Previous GAAP revaluation as deemed cost.
35.10.2.3 Fair value as deemed cost.
35.10.2.4 Revaluation option chosen under old GAAP, reverting to the cost model on transition.
35.11.1 Extract from FRS102: Section 35.10(f).
35.12 Optional exemptions – Compound financial instruments.
35.12.1 Extract from FRS102: Section 35.10(g).
35.13.1 Extract from FRS102: Section 35.10(l).
35.14 Optional exemptions – Dormant companies.
35.14.1 Extract from FRS102: Section 35.10(m).
35.14.2.2 When is an entity considered dormant?
35.15 Optional exemptions – Deferred development costs as a deemed cost.
35.15.1 Extract from FRS102: Section 35.10(n).
35.15.2.2 What happens if an entity expensed developments costs in the past?
35.16 Optional exemptions – Borrowing costs.
35.16.1 Extract from FRS102: Section 35.10(o).
35.17 Optional exemptions – lease incentives.
35.17.1 Extract from FRS102: Section 35.10(p).
35.17.2.2 Leases incentives received since the date of transition.
35.18 Optional exemptions – Public benefit entity combinations.
35.18.1 Extract from FRS102: Section 35.10(q).
35.19.1 Extract from FRS102: Section 35.10(r).
35.20 Optional exemptions – Hedge accounting – deemed meeting of hedge documentation conditions.
35.20.1 Extract from FRS102: Section 35.10(t).
35.21.1 Extract from FRS102: Section 35.10(u) and Section 35.10(v).
35.22 Impracticability – In transition.
35.22.1 Extract from FRS102: Section 35.11.
35.22.2.1 What is defined as impracticable.
35.22.2.2 What is the exemption.
35.24.1 Extract from FRS102: Section 35.12-35.15.
35.24.2.2 Sample Accounting policy note detailing first time disclosure.
35.24.2.3 Transition exemption not (application of Section 35.12 to 35.15 of FRS 102).
35.24.2.4 Transition note – (applying requirements of Section 35.12 to 35.15 of FRS 102).
35.24.2.4.1.1 Holiday pay accrual.
35.24.2.4.1.2 Rent free period for operating leases.
35.24.2.4.1.3 Revaluation of tangible assets.
35.24.2.4.1.4 Sales on unusual credit terms.
35.24.2.4.1.5 Capitalisation of borrowing costs.
35.24.2.4.1.6 Investment Property carried at fair value.
35.24.2.4.1.7 Deferred taxation.
35.24.2.4.1.8 Revaluation of tangible assets.
35.24.2.4.1.9 Revaluation of tangible assets.
35.24.2.4.1.10 Past service costs – Defined benefit scheme.
35.24.2.4.1.11 Defined benefit scheme previously accounted for as a defined contribution scheme.
35.24.2.4.1.12 Net interest charge on defined benefit schemes.
35.24.2.4.1.13 Recognition of pension surplus.
35.24.2.4.1.14 Acquisition of non-controlling interest.
35.24.2.4.1.15 Restatement of prior acquisitions.
35.24.2.4.1.16 Loans and advances to group/related companies/directors.
35.24.2.4.1.17 Loans and advances from group/related companies/directors.
35.24.2.4.1.19 Traded investments.
35.24.2.4.1.20 Computer software.
35.24.2.4.1.21 Prior year adjustment – material error.
35.24.2.4.1.22 Statement of cash flows.
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35.2 First-time adoption – Extract from FRS102: Section 35.3-35.6
35.3 A first-time adopter of this FRS shall apply this section in its first financial statements that conform to this FRS.
35.4 An entity’s first financial statements that conform to this FRS are the first financial statements in which the entity makes an explicit and unreserved statement in those financial statements of compliance with this FRS. Financial statements prepared in accordance with this FRS are an entity’s first such financial statements if, for example, the entity:
(a) did not present financial statements for previous periods;
(b) presented its most recent previous financial statements under previous UK and Republic of Ireland requirements that are not consistent with this FRS in all respects; or
(c) presented its most recent previous financial statements in conformity with EU-adopted IFRS.
35.5 Paragraph 3.17 defines a complete set of financial statements.
35.6 Paragraph 3.14 requires an entity to disclose, in a complete set of financial statements, comparative information in respect of the preceding period for all amounts presented in the financial statements, as well as specified comparative narrative and descriptive information. An entity may present comparative information in respect of more than one preceding period. Therefore, an entity’s date of transition to this FRS is the beginning of the earliest period for which the entity presents full comparative information in accordance with this FRS in its first financial statements that comply with this FRS.
35.2.1 OmniPro comment
35.2.1.1 Analysis
FRS 102 should be applied by all entities for periods beginning after 1 January 2015 unless the entity wants to and is eligible to apply FRSSE effective January 2015 and the period is beginning before 1 January 2016. The date of transition is therefore the beginning of the comparative period included in its first financial statements in conformity with as stated in Section 35.6 FRS 102. The length of the comparative period is irrelevant, it is the date from the start of that comparative period which dictates the transition date as any financial statements presented must conform with FRS 102 in full in order for these to be descripted as conforming to FRS 102 as stated in Section 35.4 of FRS 102. See Section 3.17 for what need to be included in a full set of financial statements
35.2.1.2 Illustration of transition dates
Example 1: Transition date
Company A has a 31 December year end. Therefore the first financial statements in conformity with FRS 102 is for the year ended 31 December 2015. The date of transition is therefore the 1 January 2014. Therefore the balances at 1 January 2014 form the opening balances (statement of opening position) under FRS 102 and will need to be restated to conform to FRS 102. The year end 31 December 2014 will also have to be restated.
Example 2: Transition date
Company A usually had a 31 December year end. However the prior year financial statements were prepared for the 18 month period 1 July 2013 to 31 December 2014. The date of transition is therefore the 1 July 2013.
35.2.1.3 Complete set of financial statements
A complete set of financial statements under FRS 102 (which does not meet the definition of a small company under Section 1A and do not meet the definition as a qualifying entity) shall include the following:
- Statement of financial position/balance sheet
- Statement of comprehensive income
- Statement of changes in equity
- Cash flow statement
- Notes to the financial statements
35.2.1.4 Statement of compliance and statement that these are first set under FRS 102
In order for financial statements to meet the definition of being prepared under FRS 102, there must be an unreserved statement of compliance disclosed in those financial statements. See an example of such a statement below.
Example 3: compliance statement on adoption of FRS 102
‘This is the first set of financial statements prepared by XXXXX Limited in accordance with accounting standards issued by the Financial Reporting Council, including the FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”). The company transitioned from previously extant UK and Irish GAAP to FRS 102 as at 1 January 201X.
Example 4: compliance statement for companies applying the FRS 102 small entities financial statements
Example wording to be included in the small entities financial statements below (note not mandated but the inclusion illustrates best practice.)
‘‘This is the first set of financial statements prepared by XXXXX Limited in accordance with accounting standards issued by the Financial Reporting Council, including the FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”). The company transitioned from previously extant UK and Irish GAAP to FRS 102 as at 1 January 201X. The company has prepared the financial statements on conformity with Section 1A of FRS 102
Where the exemptions are being claimed by qualifying entities as detailed in Section 1 of FRS 102, the entity should provide a disclosure to this effect. The below provides proposed wording for such a statement.
35.2.1.5 Disclosure where an entity is applying the reduced disclosure framework
FRS 102 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in FRS 102 which addresses the financial reporting requirements and disclosure exemptions in the financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of FRS 102.
The company is a qualifying entity for the purposes of FRS 102. Note X gives details of the company’s parent and from where its consolidated financial statements prepared in accordance with (insert GAAP) GAAP may be obtained. The company has notified its shareholders in writing about, and they do not object to, the use of disclosure exemptions availed of by the company in these financial statements.
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Examples
Example 3: compliance statement on adoption of FRS 102.
Example 5: Acquisition not resulting in a change of control after date of transition.
Example 6: Disposal resulting in no change in control in the subsidiary after date of transition.
Example 12: Previous GAAP revaluation as deemed cost.
Example 13: Fair value as deemed cost.
Example 14: Revaluation option chosen under old GAAP, reverting to the cost model on transition.
Example 16: Adoption of fair value through profit and loss on transition
Example 17: Adoption of fair value through other comprehensive income on transition
Example 18: Lease incentives since date of transition.
Example 19: Extract from the accounting policy note.
Example 20: Extract from the notes to the financial statements – Transition exemption rate.
Example 21: FRS 102 Principle Adjustments.
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