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Double entry for Freehold reversion

Please could someone help me with the double entry needed to record a valuation for "Freehold Reversion" in a set of accounts?

A Ltd Company is set up and buys a freehold plot of land with a residential property on it. The co sells the property to an individual on a 100 yr plus lease. At the same time sells the company which now consists of shares and the freehold ground on which the leasehold property sits. The new owners have to produce a set of accounts which report a value for the "Freehold Reversion". How should I handle this...?

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Fixed Asset Investment

This should be included as a fixed asset investment.

The asset should be revalued at appropriate intervals and any increase/decrease in value treated as profit/loss on disposal of that

I assume that the FR was valued at the time the company was purchased, in which case you have an accurate value to produce this set of accounts unless you know of any factors which mean the value has dramatically changed.

Revaluing the asset is normally done on the basis of a YP (multiple of the ground rent income) or yield calculation - speak to a property surveyor if you need advice on this.

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26th Feb 2013 13:58

The previous company filed dormant accounts in the year the transaction happened and no FR valuation appears to have taken place. I am not sure how to bring this into the accounts and at the present time there has been no ground rent income.

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?

Not sure how the previous company could file dormant accounts if it sold a property?

You need to post the opening balance sheet based on what the new company acquired - did it purchase the shares of the old co or the assets and liabilities?

 

 

 

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27th Feb 2013 10:17

It's a little clearer to me now.... The company was originally  formed after the property (leasehold) was sold so only contined shares and freehold reversion. The previous accounts (filed dormant) only recognised the shares and I suppose valued the freehold reversion effectively at zero(?). The new shareholders purchased 100% of the  shares from the ex shareholders mid way through the accounting period and the freehold reversion went with it (so I guess the assets & liabilities as well). It is not a new company it's a transfer of owernership of the old.  

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