Depreciation on Investment Properties, Long leasehold and Freehold Properties
Hi, Just wondering if anybody could clarfying a few points in relation to Depreciation on Freehold, Leasehold and Investment properties in FRSSE accounts:
My Understanding is that Investment properties are on the balance sheet at their carrying value and are not depreciated. Therefore in the disclosures to the accounts I include a departure from CA 2006 and we professionally have the properties valued every 5 years and in the interim period the directors can value the properties?
Also if we wished to do so, rather than revalue as above could we opt to depreciate the properties at 2% each year to avoid having professional valuation's every 5 years?
Is a property classed as an investment property for these purposes if its let to a connected party at a market value rent, if not I assume we then follow FRS 15?
If the lease is less than 50 years, then is it ok if we depreciate over the life of the asset on a straight line basis? What if the lease is more than 50 years? Is it still ok to depreciate over the life or would we fall into impairment reviews? If so, who could do the valuations and the timeframe?
In the Frsse it is silent regarding depreciation of Freehold properties, I therefore assume that we then follow FRS 15. FRS 15 says to depreciate the buildings, but obviously the land is not depreciatable? Therefore to save time having to split the buildings and the land if not easy ascertainable, would you say that its acceptable to depreciate it all at 2%? Is it also acceptable to deprectiate at the rate of 1% or would this be frowned upon?
I am aware that depreciation is charged due to the consumption, however in reality if we charge 2% depreciation after a number of years the financial statements wont represent a true and fair position, as per the FRSSE?
If this turns out to be the case to ensure the statements show a true and fair representation could we revalue, if so would this need to be done by a professional valuer? Also if we revalue the properties after 10 years, would this constitute a change in accounting policy? After this revaluation would we then have to revalue every 5 years or could we still continue to depreciate at 2/1% as before?
Thank you in advance for your anticipated response.
- Accountant software 400 11
- Accounting jobs in the UK 133 2
- Foreign income on Self Assesment 227 1
- What aspects of accountancy/book-keeping most trouble people 134 2
- Dividend paid to non-shareholder 190 4
- CIS gross status review 84 1
- Notes needed for a new partner in an LLP 120 2
- Dividend payments to spouses 346 6
- Flat rate vat error 236 5
- Whats the best way to keep my accounts? 126 5
- How do I clear transaction history - Sage 50 v9 138 2
- Whats the best way to keep my accounts? 73 1
- Property versus Trade in a Ltd Company 137 4
- When will Private Principal Residence Relief cut will start? 356 8
- Snotty HMRC letter - continued 611 17
- Dispensation pointless ? 264 4
- Accountant Pays Clients Tax 604 11
- Are bankruptcy restrictions order becoming more common? 198 4
- Charge out rates in London? 211 2
- Negative retained earnings & Dividends 177 3
- Desperately seeking Susan, Sam or anyone with any other name 749
- Experience with Islamic investor following Sharia-compliant rules? 481
- Darwinpay Partnership Assessment 295
- How to format a stock book 260
- S464A Charge to tax: conferring benefit & BIK 210
- Tax efficient holding company structure 199
- Investment property company accounts template 188
- Outlook 2007 with business contact manager not loading on new laptop 184
- auto enrolment - calculation of first pension deduction 167
- Sage 50 Customer Statements and Running Balances 155