Legal Fees as an asset?

Emma1708

A friend of mine is a sole trader and has asked me to look at her accounts as she would like me to do them next year rather than the accountancy company she has been using.

On the schedule of fixed assets it has 'Legal fees etc' and a figure for this as part of the fixed assets

Can anyone please explain why this would be?



Thank you

T.C.

Current assets would imply legal fees paid in advance, but I can't think why they would be fixed assets! Sorry.

Bluewednesday

Just an off the wall thought, could it be legal fees relating to bringing an asset into use (although in that case it I would have thought it should be capitalised as part of that asset) or something to do with an intangible asset?

Wayneo157

Bluewednesday wrote: »

Just an off the wall thought, could it be legal fees relating to bringing an asset into use...

Hi,

I would think that this is highly likely as legal fees incurred on the purchase or construction of new assets are not deductible from trading income but can qualify for capital allowances so they should be capitalised.


Regards

Wayne

peugeot

FRS 15 states that all costs incurred in bringing a fixed asset to its present state and location should be capitalised. In the case of (lets say) a building, legal feels incurred in connection with the purchasing of the leasehold title or freehold would be capitalised. Legal fees incurred, also,in connection with intangible assets - for example goodwill - would also be capitalised.

Kind regards
Steve

Bluewednesday

That's what I thought but would legal fees be listed separately - or included in the cost of the asset? I thought they would be included in the cost of the asset, intangible or tangible.

peugeot

On the fixed assets schedule within the accounts file they could be shown separately, however, in the financial statements themselves you would normally include them within tangible/intangible fixed assets.

Steve

Emma1708

Thank you for the helpful replies.

The only things in the fixed assets are: -

Property
Release of covenants
Alterations and improvements
2 x company cars
Legal fees

So the most likely reason would be that they are fees in relation to the property purchase?


Thanks

peugeot

More than likely, yes. The completion statement when the property was acquired should tell you. They could relate to the covenants also.

Kind regards
Steve

Emma1708

Thanks Steve