FRS 102 – how was it for you?

12 December 2016

The biggest change to the accounting regime in a long time came into effect for accounting periods beginning on or after 1 January 2015 – which means that almost all housing associations have now prepared their accounts on the new basis. So, how was it for you?

Was it as painful and resource intensive as anticipated? Or was it a breeze? The answer for most is somewhere between these two extremes.

Transitional options

FRS 102, with the 2014 SORP and accounting direction alongside it, offered choices only available as a one-off option at transition to the new regime.

During early consideration of FRS 102, many were attracted by the option of using a previous valuation of housing properties, and moving forward treating that valuation as if it was cost. In reality, very few applied this in practice, and most associations which have previously accounted for properties at historic cost continued to do so, without the one off ‘uplift’ of using a valuation. Most of those who historically accounted at valuation chose to ‘freeze’ the valuation and continue as if it was cost.

Those accounting at valuation in the future will be rare, with only three of the largest 100 adopting a valuation policy in their 2016 accounts.

Investment properties

We found that the process to identify investment properties was a significant task for many, and most associations now have investment property on the balance sheet, whereas this was relatively uncommon previously. For some, there was a costly exercise to obtain valuations at transition and year end dates.


This year, we had the trigger which meant an impairment review was required by most. We saw relatively little impairment write down in accounts, as the comparison of carrying amount to ‘value in use – service potential’ generally meant a charge was not required. We saw some examples of the write back of historic impairment when assessed under the new guidance.


The biggest change in pension accounting related to those in the social housing pension scheme defined benefit plan. The requirement to recognise the agreement to fund the past service deficit created significant liabilities on many balance sheets and was the biggest financial impact for many. There was some confusion about where this should sit on the balance sheet, with all those we saw disclosing as a ‘creditor’ not a ‘pension deficit’ in the final version.

Holiday pay accrual

Everybody’s favourite subject! Many set out to demonstrate the hours/days taken to calculate the figure, resulted in an immaterial amount that would not be accounted for. However, after all the effort, most accounted for it.

Financial instruments

This is the area which received most discussion in the lead up to implementation, with some issues being debated very late in the day. While the accounting treatment was determined by most prior to the preparation of the financial statements, many underestimated the effort required in terms of disclosure and the documentation of accounting policies. This applies to those with only basic instruments, as well as those with non-basic.

This area, more than most, is still evolving, and we anticipate that some treatments may be revisited next year as FRS 102 settles down.

Key estimates and significant judgements

As mentioned above in the context of financial instruments, writing the accounting policies section of the accounts and the new disclosure requirements were underestimated by many. Specifically, the requirement to describe policies on key estimates and significant judgements contained within the accounts. This section is now significantly longer than it used to be, and we anticipate that improvements will be made next year as good practice emerges.

Further information

These issues and more will be explored in further detail in Beever and Struthers’ annual review of the Top 100 Registered Providers, due out early in 2017, which promises to be an even more interesting read than usual.

I’ll also be speaking at the session ‘Implementation of FRS 102 and the Housing SORP’ during the Housing Finance Conference and Exhibition in March 2017.


Purchase tickets before next year's programme is released (3 November 2017) and you'll save £200 off the standard price with our trust ticket - find out more.

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