valuation method UK GAAP

valuation method UK GAAP

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Hello everyone

I have a query regarding valuation of investment in stocks , private equity , derivatives etc

Should it be valued at historical cost or at market value (i.e fair value) ??what is the requirement by UK GAAP?

Our client has invested in private equity , hedge funds, derivatives & stocks and now they want us to produce accounts. Please give some guideline how we should value these assets in accounts (balance sheet & P&L as per UK GAAP)

Thanks

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By Paul Soper
15th Jul 2013 15:18

Statutory accounts?

I'd assume they are not statutory accounts and are required by the client for their own purposes.  If so ask them how they would like the accounts prepared.  Explain that you could prepare accounts based on historic costs (and they would find that useful for CGT purposes as it could be prepared in such a way that average base cost can be easily established) or 'mark to market' as large financial institutions do within GAAP, this involves revaluation each year, greater difficulty from a CGT perspective as costs are obscured by revaluation, great volatlity where markets rise and fall and, in general a pain the backside unless you a financial institution required to apply them.  Both are acceptable under GAAP, and incidentally company law, so, unless some regulation takes it out of your hands you, and the client can choose.

Obviously where you base totals on historic cost you would annotate the accounts to show current values as well.

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