Assets question

Assets question

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If you reduced your asset balance in 2017 by £1m, on assets you purchased in 2016 for £10m (£10m recorded in 2016 capex), should your capex balance in 2017 be impacted by -£1m?

Thanks 

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paddle steamer
By DJKL
07th Jan 2019 22:27

No

Capex is Capital Expenditure , or possibly Net Capital Expenditure.

As you do not reduce any disclosed capex cost re depreciation why would you reduce it re an impairment, neither of these are linked to Net Capital Expenditure.

You are not very clear what the Capex Balance figure you are calculating is used for/where it is disclosed, can you explain context?

Thanks (1)
ALISK
By atleastisoundknowledgable...
08th Jan 2019 06:56

If you’re impairing a fixed asset, then yes - credit asset, debit P&L or revaluation reserves.

You need to give more info though.

Thanks (1)
Replying to atleastisoundknowledgable...:
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By qwertyqwerty05
10th Jan 2019 23:24

Thanks. The adjustment is due to an software asset sale, the offset is a loss on sale. Cr Asset, Dr loss on sale. Does the Asset BS credit impact the current years capex amount (reduce it)? The assets were acquired in a different year and reporting period.

Thanks (0)
Replying to qwertyqwerty05:
paddle steamer
By DJKL
11th Jan 2019 00:57

Where and for what purpose are you disclosing capex?

Capex tends to be sum spent in year acquiring capital assets ,Net Capex is sums spent in year acquiring capital assets less sums received in year on the disposal of capital assets.

An impairment or depreciation is not sums spent so in the above context does not feature in any calculation of Capex I can envisage.

What amount of money did you actually receive re the sale (as opposed to book value written off), that is a capital receipt and would impact Net Capex.

(Note Capex is not really an accounts item except within a cashflow though additions are noted within the fixed asset note but proceeds are not, proceeds net against the NBV of the items sold in the P & L (or I & E)

Thanks (0)
Replying to qwertyqwerty05:
paddle steamer
By DJKL
11th Jan 2019 01:02

As an example say your sale is for £1,000 that you receive, Cost of asset was £2,000, Amortisation to date of asset say £500

You have

Dr Bank £1,000
Cr Loss on sale £1,000

Re the actual money received

Then

Dr Software b/fwd amortisation £500
Cr Software cost b/fwd £2,000
Dr Loss on sale £1,500

So the I & E has a net DR £500 ( loss) (1000-1500)

The capex receipt is £1,000 (the actual money received) if somewhere disclosing Net Capex (not in accounts in a different report) this would reduce whatever you spent on new assets in the year.

Thanks (0)