In order to obtain optimal visual quality while meeting the bit rate requirements, a video transcoder needs efficient rate-control with fine and dynamic adjustments. This paper proposes a new frequency domain complexity estimation scheme and an algorithm for adaptive bit allocation during transcoding. In conjunction with frame skipping mechanism, the proposed algorithm adaptively determines spatial coding parameters to realize very low target bitrate for MPEG-2 to MPEG-4 transcoding. Experiments show that the proposed algorithm perfom accurate target bit rate transcoding, improves the visual quality and effectively alleviates visual quality degradation during scene changes.