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Dilapidations Advice

Repurposing of dilapidations or not?

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Hi All,

First time of posting here so great to meet you all. 

I am hoping someone may be able to provide some helpful advice on dilapidations. Over the last 2 years we have been putting aside a provison for dilapidations for one of our premises. We have recently left the property and moved into a managed office block (only requiring a very small provision). My question is, can i repurpose the provision for our new office space and write the remaining balance back to P&L, or, do is it better practice to write back the entire provision and the begin to provide a new dilapidation for the new property. 

 

Any advice would be greatly appreciated.

Replies (7)

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By David Ex
07th Sep 2021 11:03

Not sure what you mean by “repurpose” but any provision needs to be considered on its own merits.

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By paul.benny
07th Sep 2021 11:11

You've tagged FRS102, so presumably you've already checked that.

But in case you haven't, the relevant section is 21. Amongst other things, to recognise a provision, you must be able to estimate the amount reliably. For the most part, this rules out general dilapidations provisions.

You might also want to check the lease terms on your new premises to understand whether you are even liable for such costs.

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Replying to paul.benny:
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By David Ex
07th Sep 2021 11:23

paul.benny wrote:

You've tagged FRS102, so presumably you've already checked that.

But in case you haven't, the relevant section is 21. Amongst other things, to recognise a provision, you must be able to estimate the amount reliably. For the most part, this rules out general dilapidations provisions.

One wonders if the “old” provision was correct if it was made only in the two preceding years but was then apparently not required.

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Replying to David Ex:
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By paul.benny
07th Sep 2021 11:47

Indeed

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By Paul Crowley
07th Sep 2021 11:52

My opinion is that saving up for any possible future expense is just general P & L reserves
Reserve accounting was done away with years ago

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Replying to Paul Crowley:
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By Bobbo
07th Sep 2021 13:30

To be fair, frs102 does state that the cost of an item of PPE includes an estimate of the cost of dismantling and restoring the site to original condition.

I daresay this point is aimed at more substantial things than the cost of removing partition walls and such in an office though.

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By Bobbo
07th Sep 2021 13:27

Write back the entire previous premises provision. Start new provision at new premises, if it meets the recognition criteria

won't get into the accuracy (or lack of) the previous premises provision if there is enough of it remaining, after settling any dilapidation claims from the landlord, for this to be being considered.

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