Gill Gittings
Gill Gittings Registered Posts: 121 Dedicated contributor 🦉
If a client changes from historical cost as a basis for accounting for fixed assets but then opts to value under Market value is this a change in accounting policy therefore going back to previous years accounts?

I'm confused with how to apply this.


  • Steve Collings
    Steve Collings Registered Posts: 997 Epic contributor 🐘
    Hi Gill,

    The change you describe is, clearly, a change in accounting policy. FRS 18/IAS 8 both take a similar stance on changes in accounting policy(ies), i.e. retrospective application. However, the provisions in FRS 18/IAS 8 do not apply to initial application of a change from depreciated historic cost to fair value. A fair value as at 31 March 2011 may well be materially different than as at 31 March 2010.

    Be careful - some clients think that they can do a switch back from fair value to depreciated historic cost when things get a bit "too much" for them to maintain market values. There is no more a reliable value than fair value, and a change in accounting policy under FRS 18/IAS 8 is undertaken because management consider the revised policy to present a true and fair view (or "present fairly" if you're talking IFRS speak). This "stance" that both standards take (i.e. you change a policy because it gives a more fairer view) suggests that once you are on the revaluation road, you are there for good due to the inherent uncertainty with depreciated historic cost.

    Best regards
  • Gill Gittings
    Gill Gittings Registered Posts: 121 Dedicated contributor 🦉
    Thanks Steve
  • Barry
    Barry Registered Posts: 101 Dedicated contributor 🦉
    Gill and Steve thanks for this as I had a similar situation. A really good reply from Steve. Not challenged either by a certain forumite.
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