FRS 102/105 and Freehold Property

TreadStone
TreadStone Feels At HomeAAT Licensed Accountant Posts: 280 💫 🐯 💫
edited August 2017 in Tax
Further to a previous post of mine relating to FRS 102/105, we're in the process of producing accounts (ye 31 March 2017) for a client with £375k freehold property figure on the BS.

The £375k is the cost from circa 2007 I believe. No depreciation has been applied.

This relates to the build of 15 industrial units which the company built and rents out. That's all the company does.

These accounts will be produced under FRS102, the same as all the other company clients.

Rightly or wrongly, the client has never had the units valued and is unlikely to pay for any professional valuation.

For those that do this often, what entries are necessary regarding the valuation ?

The more I read on the topic, the more it makes less sense......

Steve Collings, if you read this, your input would be welcome :)

Thanks.

Comments

  • TreadStone
    TreadStone Feels At Home AAT Licensed Accountant Posts: 280 💫 🐯 💫
    Wow 17 views already, popular topic then........... :/
  • Rozzi Rainbow
    Rozzi Rainbow Trusted Regular Registered Posts: 465
    Why are you using FRS102 rather than FRS105? Have you given the client the choice, or are you just doing that cos it's what you're doing for all other clients?

    For our investment property companies we're giving them the choice - FRS102, which requires yearly revaluations, or FRS105 which doesn't (with a warning the accounts are less detailed but our fees won't be less, and they might not be enough for the bank if they require more information). The two I've done so far have gone with FRS105.

    My (limited) understanding is if you/they wish to go with FRS102, then a revaluation would be required as at 31/03/17, and also at 31/03/16 for the comparative BS. The revaluation is then taken to the P&L (but non-distributable).

    There's some info on HMRC here: (you may want section 7)
    https://www.gov.uk/government/publications/accounting-standards-the-uk-tax-implications-of-new-uk-gaap/frs-102-overview-paper-income-tax-implications#investment-property

    Or here for FRS105: (section 6)
    https://www.gov.uk/government/publications/accounting-standards-the-uk-tax-implications-of-new-uk-gaap/frs-105-overview-paper-tax-implications

    Hope this is some help.
  • TreadStone
    TreadStone Feels At Home AAT Licensed Accountant Posts: 280 💫 🐯 💫
    I appreciate you taking the time to respond.

    I've previously read the links thanks.

    FRS102 gives,as you say, more information which is what the clients expect and are used to so are produced pretty much as standard and suit 99% of our clients.

  • Rozzi Rainbow
    Rozzi Rainbow Trusted Regular Registered Posts: 465
    Likewise ... in our case the 1% it doesn't suit are those with investment property! You say your client is unlikely to pay for valuations - maybe they would be happier to go with FRS 105?

    Under FRS102 you have to disclose in the notes whether the valuation has been made by a qualified person or not - so if the director uses their own valuations, this would need to be noted. See section 16.10 of FRS102.
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