Technical Q for financial reporting accountants?
Client company owns a site from which it used to trade (sawmills and timber merchant). Trade was sold last year and company is mainly investment activity now.
In the company accounts we have Land & Buildings as follows:
Land at MV £750k (approx 25 acres)
Buildings at MV £1,500,000.
The buildings were very old and the MV was at a time when it was used by the profitable trade, probably supporting the valuation.
The land is in a good location and Asda have expresses an interest in it, indicative value c£5-7m depending on planning size granted.
During last year to 31 December 2009 company has spent c£300k in demolition costs and professional fees and building has been pulled down. As at 31 Dec 09 it is land only.
1. Should we treat the £300k demolition costs as additions to land?
2. We will likely need to remove the valuation of the building £1.5m from the balance sheet, obviously we need to bring in a corresponding uplift for the revised valuation of the land. What are your thoughts on this?
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