[et_pb_section admin_label=”Header – All Pages” global_module=”1221″ transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”||0px|”][et_pb_row global_parent=”1221″ admin_label=”row”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ admin_label=”Post Title” title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” title_all_caps=”off” use_border_color=”off” border_color=”#ffffff” border_style=”solid” title_font=”|on|||” title_font_size=”35″ custom_padding=”10px|||”] [/et_pb_post_title][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” global_module=”1228″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”0px||0px|” padding_mobile=”on” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row global_parent=”1228″ admin_label=”Row” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”0px||0px|” padding_mobile=”off” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ admin_label=”Text” background_layout=”light” text_orientation=”left” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [breadcrumb] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]
[button link=”https://ie.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button]
[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]
[button link=”https://ie.frs102.com/members/premium-toolkit/section-13/” type=”big” color=”red”] Return to Section 13 Home[/button]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]
Transition exemptions
Section 35 provides no transition exemptions.
Principal transition adjustments
- Spare parts
Section 17.5 which is the standard that deals with property, plant and equipment makes it clear that -spare parts are classified as property plant and equipment when they are expected to be used during more than one period or only used in connection with an item of property plant and equipment. Where this is the case the spare part is depreciated over its useful life which cannot be more than the useful life of the main asset for which the spare parts are utilised. Old GAAP provided less guidance therefore, some entities would have classified such spare parts as inventory instead of PPE. As a result on transition to FRS 102, such entities will need to recognise a transition adjustment to correct this.
Example 10: Reclassification of spare parts from inventory to PPE
Company A, has a significant value of spare parts for the production equipment. Under old GAAP these spare parts were treated as inventory. The total value of these spare parts at the date of transition was CU500,000. At the date of transition, the company determines the useful life of the spare parts to be 10 years from the date of transition and the residual value is nil. Assume the date of transition is 1 January 2014 and the tax rate is 10%. The transition adjustment required on 1 January 2014 is:
| CU | CU | |
| Dr PPE | 500,000 | |
| Cr Inventory | 500,000 |
In the 31/12/14 i.e. the comparative year for FRS 102, a journal adjustment would be required to account for the depreciation and the deferred tax impact. Note from a tax perspective the depreciation will be allowed as a deduction, therefore after transition there will be no deferred tax effect. Assume deferred tax is recognised on transition for the tax deduction not allowed in the comparative year but will be allowed as part of transition adjustments in the tax computation going forward over 5 years. The journals required are:
| CU | CU | |
| Dr Profit and Loss – Depreciation (CU500,000 / 10yrs) | 50,000 | |
| Cr PPE – Spare Parts | 50,000 | |
| Dr Balance Sheet – Deferred Tax (CU50,000 *10%) | 5,000 | |
| Credit Profit and Loss – Deferred Tax | 5,000 | |
Journals required in the 31 December 2015 year end assuming the above journals were posted to profit and loss reserves etc.
Assuming no movement has occurred no journals are required on top of what has already been posted to reserves. Even if there was movement in 2015 no deferred tax journal will be required for that movement as it would be included in the 2015 tax computation. The deferred tax of CU5,000 will be recovered over the next 5 years under the tax transition adjustments (i.e. a journal to derecognise CU1,000 (CU5,000/5 years) of this deferred tax asset required in the 2015 year and for the four years following this).
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]