In this paper, we examine spatial resolution downscaling transcoding for H.264/AVC video coding. A number of advanced coding tools limit the applicability of techniques, which were developed for previous video coding standards. We present a spatial resolution reduction transcoding architecture for H.264/AVC, which extends open-loop transcoding with a low-complexity compensation technique in the reduced-resolution domain. The proposed architecture tackles the problems in H.264/AVC and avoids visual artifacts in the transcoded sequence, while keeping complexity significantly lower than more traditional cascaded decoder-encoder architectures. The refinement step of the proposed architecture can be used to further improve rate-distortion performance, at the cost of additional complexity. In this way, a dynamic-complexity transcoder is rendered possible. We present a thorough investigation of the problems related to motion and residual data mapping, leading to a transcoding solution resulting in fully compliant reduced-size H.264/AVC bitstreams.