Paragraph 16.7 of FRS 102 requires investment properties to be measured at fair value at each reporting date. The standard does not require this valuation to be undertaken by an independent valuer with a professional qualification as long as this fact is disclosed.
The directors of a company with 25 employees, £20M turnover [31/12/15 £18M] and total assets of £5.0M [31/12/15 £4.9M] have included within assets, their own valuation of an investment property of £2M based on broad data obtained from commercial property websites. The company is therefore just below the audit threshold and they file unaudited accounts.
Due to the proximity of the company's results to the audit thresholds, there is a threat that a detailed professional valuation of the property could push the company into an audit. However, the directors do not want to go to the expense of a professional valuation each year as they see no commercial benefit, especially if it only confirms that their valuation is correct.
1. On the basis that there is no indication that the accounts are materially misstated, can an accountants report be issued?
2. Should the company's other assets push it into audit in future years, can anything other than a professional valuation give reliable audit evidence for an investment property valuation, or is a qualification inevitable?
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You cannot persuade them to say pay for a desktop valuation every five years?
It would not need to be Red Book, so does not need to be that expensive, though maybe a Red Book would serve their purpose better.
From experience we seem to be better at sniffing the air re what our properties are really worth compared with the Red Book valuations from professional surveyors, these are usually lower than our perception and lower than what we thereafter achieve on sale. This is likely due to surveyors being paranoid about being sued by banks, since 2007/2008 they have certainly become timid creatures re commercial property valuations.
So the irony is if they get a Red Book valuation it might well be lower than their own valuation. (Unless their own valuation is a total fudge)