Investment property accounting policy

Investment property accounting policy

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If a company's accounting policy for Investment Properties says the properties are revalued every 5 years, but a valuation wasn't done within that five years (but one will be done this year), what are the implications? What disclosures are required? Does the asset then have to be depreciated as a "normal" fixed asset?

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By johngroganjga
16th Feb 2015 15:21

Firstly the company seems to have a non-compliant accounting policy.  The requirement for investment properties is for annual valuation.

Secondly, don't worry about the past.  Just get  the next accounts right.

No - investment properties are not depreciated. They are not "normal" fixed assets.  The accounting policy note should make that clear as well..

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Replying to flightdeck:
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By jonathanw
16th Feb 2015 15:30

Formal valuation

Thanks John

I wasn't abundantly clear, sorry.

There is an annual assessment of valuation (by the directors), but a formal one (independent party) should be done every 5 years (per the policy)

I also meant that I wasn't sure that if it didn't meet the requirements of the policy as an Investment Property, I'd have to reclassify it as being a normal TFA, and therefore depreciate it.

I appreciate your help.

Thanks

Jon

 

 

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By johngroganjga
16th Feb 2015 15:42

Thank you for the clarification.

No.  An investment property is an investment property because of what it is, and the use that is made of it, and the reasons why it is held.  It is not an investment property because of the way it is accounted for.  Rather it is, or should be, accounted for the way it is because it is an investment property

I apologise for the length of this response, but I find the idea that something should be reclassified as something that it is not because it has not been accounted for correctly rather odd.   

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By jonathanw
16th Feb 2015 15:58

Overstretching

FRS102 says that if a reliable measure of fair value is no longer available without undue cost for... investment property measured using the fair value model, the entity shall thereafter account for that item as a property, plant, & equipment.

I just (over)stretched the idea that a valuation hadn't been done as frequently as required to be a little like the measure of fair value no longer being available.

Reading too much into it, obviously.

Thanks for your help.

 

Jon

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