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Additions to investment property - P&L vs BS

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Hi

 

If company X has an investment property valued at £10m. Say in year 1 they spend £0.5m on improvements to the property. How is this reflected in the accounts?

 

Is this Cr Cash Dr investment property? Or does this need to go through the P&L somehow due to fair value rules?

 

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07th Jul 2018 07:41

You are confusing two different things. The first is the actual physical transactions Cr cash Dr investment property 0.5m. The other is the fair value transaction - the difference between the value on the accounts and the fair value of the property at the year end date. Assuming the new fair value exceeds the cost of improving then Dr investment property Cr P&L with the difference. The property owner should have an independent valuation of the property at the year end date. The second transaction is only relevant if the property owner is a limited company and you’re preparing accounts under FRS 102.

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