Route 102 – One man’s year-long journey……Day 73

To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).

Day 73 (30 June)

It was early December 2014 when the concept of a year-long trek through FRS 102 first occurred to me. To be frank, I am a much better starter than finisher, and I'll admit I had some (private) reservations about whether the Route 102 blog would last beyond the first few weeks, or (if I managed to continue) would be hopelessly off track by now.

Well, here we are exactly six months in, and given that there are 35 sections to FRS 102, I should be around the middle of section 17 about now. And to my astonishment, that's where we're up to (cue the feeling of smug satisfaction). Yesterday's post was set long ago in a galaxy far, far away - we're firmly back to the here and now today, and looking at initial measurement under the cost model for PPE.

You've hopefully picked up that there is little that divides FRS 102 and FRS 15 so far, and this continues for cost measurement. The two standards are broadly the same on initial recognition. Bearing in mind that FRS 15 is 48 pages long (in my trusty 2006 book of accounting standards) whereas the whole of FRS 102 is only 350 pages including the Appendices, you'd expect less detail in New UK GAAP and that's the case here.

For instance, paragraphs 14-16 of FRS 15 deal explicitly with start-up or commissioning costs. The Large Hadron Collider might be a good example - as I recall, it needed about 45 years to run-in before it could be used (I may be exaggerating slightly here). If this run-in period is necessary, then the running costs that result should be capitalised and carried forward until normal use commences, from which point the costs will be depreciated along with the rest of the asset. Now, FRS 102 doesn't specifically deal with this scenario but there is a brief reference to costs of 'testing of functionality' which I think covers the same ground.

One apparent omission (and initially a rather disturbing one) from FRS 102 is the treatment of finance (i.e. borrowing) costs on construction of an asset. However fear not - the new FRS deals with this topic in a separate chapter - 25 - and so we'll turn to this in a future blog post.

Ho hum. Not exactly a thrills-and-spills way to finish the half-year, but at least we're here. Subsequent measurement can wait until July...

P.S. If you missed the last instalment click here