A clients balance sheet shows a value for 'freehold property' (based on last valuation) and 'improvements to property' at cost.
The client has just had a professional valuation carried out valuing the freehold (on which the improvements have been undertaken).
The question therefore is should the book value of 'improvements to property' be transferred to the revaluation reserve together with the surplus/deficit on the freehold or should the revaluation reserve just be adjusted for the movement in valuation of the freehold and the 'improvements to property' continue to be disclosed separately at cost ??
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Replies (3)
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Why does it matter?
Why are the additions shown separately anyway?
Ultimately, it makes no difference to the accounts aside to a minor variation in one of the notes.
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I have wondered about this in the past, but from a slightly different angle.
Say b/f value is £500k
In the year we have capital improvements of £60k but value stays the same.
We have added the £60k to cost additions and then took a revaluation adjustment of the £60k debit to the revaluation reserve to show £500k at the year end.
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it might not make a difference but these are the sort of things that makes accountants happy!