Can anyone provide any insight into a transition to FRS 102 issue that has cropped up. I have a client that is in the hotel industry. They have previously adopted a policy with regards to fixed assets of capitalising the base cost of all fixtures and fittings that are regularly replaced, treating any additions as a revenue expense and providing no depreciation on the base cost that has been capitalised. This cost is held in the balance sheet year on year. Any items classed as plant and equipment (i.e. items of a larger nature that are easily identifiable) and Computer Equipment are capitalised and depreciated over useful life.
I cannot see or gain any guidance on whether this is still an allowable policy to adopt with regards to fixtures and fittings under FRS102. If it isn't and I now need to capitalise all additions and depreciate then under the transition to FRS102 would I need to go back to the prior year and restate the P&L capitalising anything that I would have expensed under the old rules and provide for depreciation?
Any thoughts on this would be appreciated.
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Yes but you mist have formed a view that taking one year with another the additions written off more or less equalled the depreciation that you would otherwise have charged.
If not you have been non-compliant for many years.
If so your NBV is unchanged on transition to FRS102.
Indeed a view would have been taken that any depreciation would be immaterial as the replacement of items would equate to any depreciation charged in the year, and at any one point it was viewed that the value in the balance sheet represented the value of F&F they would hold. So upon transition to FRS102 I cannot see any guidance as to whether this is still an allowable policy to adopt. Given that FRS102 seems to me to be more stringent in this area I would feel it appropriate upon the transition to FRS102 to change this policy and show additions and depreciation.
If we go down this route am I right in thinking that we would need to restate the prior year as if this policy were in force and we would need to capitalise anything taken to P&L and provide for depreciation in both the prior year and current year?