FRS 102 Transition Journal Entry Explained

Record the opening balance journal entry at your transition date. The right-of-use asset equals the lease liability adjusted by any prepaid or accrued rent balance on the old balance sheet (FRS 102 para 1.51(b)), so the journal's third line derecognises that balance.

Standard Entry

With no prepaid or accrued rent at the transition date, the asset equals the liability:

Transition Journal

DR ROU Asset £82,309 CR Lease Liability £82,309

With a Prepaid/Accrued Reclassification

Where a prepaid or accrued rent balance exists, it adjusts the ROU asset and the reclassification line is its counterpart. Here a £7,309 rent accrual (for example the straight-lining balance from a rent-free period) reduces the asset; clear the line against your rent accrual account, which is derecognised. Retained earnings are not normally touched.

FRS 102 Reference: FRS 102 para 1.51(b)

Entry with an Accrual Derecognised

DR ROU Asset £75,000 DR Pre-Transition Rent Reclassification £7,309 CR Lease Liability £82,309

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