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Property up for sale

Gill GittingsGill Gittings Well-KnownRegistered Posts: 121

Client has a freehold building up for sale. Do we depreciate it?



  • peugeotpeugeot Experienced Mentor Registered Posts: 624
    If your client is reporting under IFRS, then the answer is simple - no. IFRS 5 "Non-current assets held for sale and Discontinued Operations" is specific on this issue. Depreciation stops, if the asset is impaired it is written down to recoverable amount and the asset held for sale is disclosed separately on the balance sheet (statement of financial position).

    However, if your client is reporting under UK GAAP (FRS/FRSSE) then this is where the UK is not totally converged. There is no UK equivalent standard for 'assets held for sale'.

    UK GAAP defines depreciation as the "consumption of an asset". Therefore, if your client still occupies the building, then clearly they are 'consuming' the asset and depreciation should continue to reflect the consumption. However, if they have moved out and the building is vacant then they are not 'consuming' the asset and depreciation should stop. The building should also be written down to recoverable amount in the balance sheet which should be the amount on the professional valuation.

    Kind regards
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