Assets - internally generated NOT intangible

Assets - internally generated NOT intangible

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Client has made industry specific moulding, he has no accurate costs to make them but does have market values.  He wants them shown on Balance Sheet, they haven't in the past.  Was planning to use revaluation account, any other ideas in IAS?

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paddle steamer
By DJKL
25th Feb 2016 12:49

Surely he needs to

Surely  client company (presume is a company) needs to calculate an accurate cost if it wishes to now, post event, treat the mouldings as fixed assets . The company will now need to reduce direct costs previously  charged to profit and loss headings and of course, where employee time involved, this will need quantified/ adjusted as will possibly a share of indirect costs if appropriate.

What is  actually valuable, the actual physical moulding or the design of the moulding?

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Replying to tom123:
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By Samantha Perkin
25th Feb 2016 12:55

The actual moulding has the value, he is  a new client and claims he has no way of valuing the work done accurately but can "estimate"

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By johngroganjga
25th Feb 2016 13:04

Value?

As DJKL says the question is not what is its value, but what costs previously treated as revenue expenses can now be reclassified as capital.

So there should not need to be any estimating involved.

Presumably the relevant costs are the physical materials and costs of labour and machine time? 

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By JimFerd
25th Feb 2016 13:07

I don't think a revaluation would be appropriate. It sounds to me like there's know-how attached to this, and it would seem like that this know-how is where the value lies.

If he wants to claim for the costs of constructing some plant & machinery, then he should have originally accounted for the costs as such.

Any scope to claim R&D?

Take my reply with a pinch of salt though, I'm no intangibles expert though.

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Replying to Waves:
By johngroganjga
25th Feb 2016 13:38

Know how

JimFerd wrote:

 It sounds to me like there's know-how attached to this, and it would seem like that this know-how is where the value lies.

But we are told the opposite.  We are told that the value is in the mould not in the knowledge of how to make it.

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paddle steamer
By DJKL
25th Feb 2016 13:11

If a significant figure, and surely it has to be as why would anyone bother if it was not a significant figure, then he is going to have to put in some hours calculating the costs involved.

Clients are good at shrugging their shoulders re these issues (I once got into a who blinks first position  trying to calculate construction WIP at a year end where works done and  further costs to complete and future extent of further works to complete were not fully ascertained by the date I needed to complete the accounts and I could get no guidance from the directors); stick to your guns.

As a first step get him to list direct materials used  with their costs and get estimate of  hours spent on project by each member of staff.

Is there a good reason why he now desires this accounting treatment? Is window dressing a consideration?  Why now to change accounting treatment?

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By Samantha Perkin
25th Feb 2016 13:43

Thanks all for your help, back to client and say either give me figures or I don't do, which was always my gut reaction.

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