Componant accounting reading material

katz568

I know this doesn't strictly belong in here but I've just come accross my first job which requires componant accounting to be taken into consideration. A senior collegue has explained the basics and shown me the calculations etc BUT this is going to appear more often in my jobs an also several Audits i'm due to assist in this year and so I would like to do some further reading to understand a bit more.

Does anyone know of a book or website that explains this clearly and fairly simply so as to further my knowledge?

Many thanks

stevef

I think you will do well to find a book which explains it all as there are no clear definitions. The accounting standards describe the reasoning behind componantisation but leave it to individual organisations to decide what componants to use. The RICS valuation guidance leaves surveyors and accountants in a similar limbo.

The best course of action is to agree a componatisation policy and then stick to it rigidly. The more complex your policy and the more componants you have, the greater your valuation fees become, the asset register becomes more unweildly difficult to manage, and depreciation calculations become more tricky.

Given that land has to be separated from buildings anyway as land has a finite life, many public sector organisations are looking to cap the number of componats to a maximum of four, for example: the main fabric of the building, the roof, heating system plus perhaps kitchens or built in equipment. Infrastructure assets are a whole different ball game to buildings and tends to fry the brain cells (for example, for roads you have to look at the different levels, the road surface has a shorter life than the underlying road metal). Grouped assets (eg housing estates) can also be tricky as the whole estate rather than individual properties may be valued.

CIPFA in conjunction with RICS have prepared a few booklets on the subject (Have a look on CIPFA shop) and I know that CIPFA and RICS are currently working on a new updated publication (currently with Local Authority Accounting Panel for review). But while containing useful tips, the new publication still preety much says it is for each organisation to decide on its own componantisation policy.