Depreciation of Fixed Asset Investments

Depreciation of Fixed Asset Investments

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Should fixed asset investments (unlisted shares) be depreciated and on what basis if their valuation is unknown ?

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By mrme89
19th Jul 2016 16:21

No.

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Worm
By TheLambtonWorm
19th Jul 2016 16:59

I wouldn't regard a share as a fixed asset.

I believe it's just an investment, and you can choose to measure it at either cost or fair value.

I'm no expert in such things though.

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By johngroganjga
19th Jul 2016 17:14

Depreciation only applies to TANGIBLE fixed assets (other than freehold land of course). So it does not apply to shares.

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By KWest
19th Jul 2016 19:56

The role of fixed assets is to enable or enhance the production or supply of trading operations. The shares you mention are not connected with those: They are simply investments.

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By TerryD
22nd Jul 2016 14:31

There are many types of investment that qualify as fixed assets. Leaving aside the obvious ones that presumably don't apply here (such as investments in a subsidiary or participating interest), common examples are shares held in a buying group of which the company is a member or shares held in another company in order to gain a say, albeit a minority one, in the running of that other company, which might even be a competitor.
In all cases, though, the basic rule is that such investments should be stated at cost less impairment, not at fair value. You have to apply the normal impairment test: lesser of value in use and realisable value. In most cases, one would conclude that, without evidence to the contrary, cost should be the measurement for accounts purposes.

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