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Trust accounts - investments

Trust accounts - investments

I am in the process of completing a set of trust acocunts (one of very few for my firm) which has significant listed investments.

We have always carried this forward at cost price.

I deal with ltd companies usually and would always carry these at market value.

Is there a reason why they have been kept at cost price historically? Are there different rules for trust accounts?

Thanks for your help

Peter

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By petew
25th Jul 2011 14:19

Not how to value, should I value?

Thanks for that, but I do not need to know how to value, I have the paperwork from the investment managers with a valuation page so thats not a problem.

My question is whether I should be using market value or cost?

By the by, anyone know if I'm doing something wrong, I didn't get an email to tell me someone has replied to my question? Is that normal or have I missed something?

Thanks.

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By sonners
25th Jul 2011 15:01

Trust accounts

It is entirely at the discretion of the Trustees as to whether the investments are in at cost or revalued to market value at the year end.  For most of the Trust accounts we prepare (and we prepare many) we revalue as it gives the Trustees a better picture of the assets which they have a responsibility for.

That said, some Trustees prefer cost so that unrealised gains are not credited to the capital account.  In those cases we usually have an extra column for market value comparatives so that the accounts show these as well.

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25th Jul 2011 16:19

Purpose

What is the purpose of the trust ?

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By petew
25th Jul 2011 16:23

Discretionary Will Trust

Was set up on death to pay for grand childrens education, main cost is schools fees.

When the youngest reaches 18 the pot will be divided between them, very lucky children lots of money to play with!

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26th Jul 2011 07:50

True and Fair View

Use of MV holds the Trustees accountable for the quality of their management.

Cost may disguise investments in bust companies .

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By Ian Bee
26th Jul 2011 09:55

Limited company

Slightly off the main question asked but I was interested in the comment that for a limited company you would always carry listed investments at market value. I would need to look at the relevant sections of the Companies Act and accouting standards, but is this a common reporting practice under UK GAAP or FRSSE?

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By petew
26th Jul 2011 10:22

Why not revlaue for Ltd co's?

Quote from the FRSSE:

Investments

6.30 FIXED ASSET INVESTMENTS MUST INITIALLY BE MEASURED AT COST. ALTERNATIVELY, THEY MAY BE MEASURED AT A MARKET VALUE DETERMINED AS AT THE DATE OF THEIR LAST VALUATION OR ON ANY OTHER VALUE DETERMINED ON A BASIS WHICH APPEARS TO THE DIRECTORS TO BE APPROPRIATE IN THE CIRCUMSTANCES OF THE COMPANY (IN THE LATTER CASE, THE METHOD OF VALUATION ADOPTED AND OF THE REASONS FOR ADOPTING IT MUST BE DISCLOSED IN A NOTE TO THE ACCOUNTS). Gains and losses shall be recognised (in the profit and loss account or statement of total recognised gains and losses) using the same basis applied to tangible fixed assets in paragraphs 6.25 and 6.26 above.

6.31 WHERE FIXED ASSET INVESTMENTS HAVE BEEN REVALUED EITHER – THE COMPARABLE AMOUNTS DETERMINED UNDER THE HISTORICAL COST ACCOUNTING RULES (i.e. the aggregate historical cost amount that would have been included had the assets not been revalued, reflecting any write-downs to recoverable amount that would have been necessary); OR THE DIFFERENCES BETWEEN THOSE AMOUNTS AND THE CORRESPONDING AMOUNTS ACTUALLY SHOWN IN THE BALANCE SHEET MUST BE SHOWN SEPARATELY IN THE BALANCE SHEET OR IN A NOTE TO THE ACCOUNTS.

6.32 THE AGGREGATE AMOUNT OF LISTED INVESTMENTS INCLUDED UNDER EACH ITEM OF INVESTMENTS SHOWN IN THE BALANCE SHEET MUST BE DISCLOSED. FOR EACH ITEM WHICH INCLUDES LISTED INVESTMENTS, THE FOLLOWING MUST BE DISCLOSED:

(A)THE AGGREGATE MARKET VALUE OF THE LISTED INVESTMENTS WHERE IT DIFFERS FROM THEIR BALANCE SHEET AMOUNT; AND

(B)BOTH THE MARKET VALUE AND THE STOCK EXCHANGE VALUE OF ANY INVESTMENTS, OF WHICH THE MARKET VALUE IS TAKEN AS BEING HIGHER THAN THE STOCK EXCHANGE VALUE.

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26th Jul 2011 12:58

Note

There should at least be a note on the face of the accounts of MV to prevent the accounts from being misleading.

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By petew
26th Jul 2011 13:03

Dealt with in a note

For a Ltd co I would disclose this in a note and would of course have a STRGL.

For my trust accounts we have opted to show cost price on the balance sheet with a note disclosing the market value.

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