FRS 102 Property rented to group company

FRS 102 Property rented to group company

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The parent company of a group owns properties which it rents out to the subsidiary companies. Under the new FRS 102, properties leased out to group companies which meet the definition of investment properties can be classified as such in the individual accounts.

My query is that, the properties rented out are used by the subsidiary companies for production of goods. Since the parent company is not involved in the production of goods itself, and receives rent for the properties, I presume in the parents individual accounts the properties should be treated as investment properties?

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By johngroganjga
31st Mar 2016 11:41

My understanding is that this is one of the changes FRS102 is bringing with it.

Prior to FRS102 the property you describe would not have been accounted for as an investment property.  Under FRS102 it will be, although of course it will have to be re-classified on consolidation if one is being done!

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By lmburton21
31st Mar 2016 11:43

That was my understanding too, although I was advised that it should still be treated as PPE due to the subsidiary company using it for production.

Didn't sound right to me, so best to double check!

Thank you.

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By johngroganjga
31st Mar 2016 11:53

Whoever has so advised you was spot on for many years prior to FRS102, but has not kept up with the changes that it is bringing, or at least not with this particular one.  

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