FRS 105 and impairment of investments

Is previous year impairment reversed under FRS 105 if value has increased during the year ?

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A ltd company client has Unit Trust investments which were reported at historic cost (cost less impairment) last year (FRSSE).

Accounts being prepared under FRS 105. The value of the Unit Trust investments have increased in the current year.

Am aware that under FRS 105 investments are not reported at 'fair value' but historic cost (cost less depreciation and impairment) instead.

The question is given that the investments have increased in value this year (beyond their cost price) should the impairment last year now be reversed resulting in the Unit Trusts being reflected in the accounts this year at original cost which will still be below their fair value ?? or should the impairment last year remain in the accounts this year even though these are no longer impaired and have actually increased in value.

Many thanks.


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John Toon
By John Toon
06th Dec 2017 10:42

What does FRS 105 say? I'll save you the task of using google to find out...

9.19 A micro-entity shall reverse a previously recognised impairment loss if in a subsequent
period the amount of an impairment loss decreases and the decrease can be related to
an event occurring after the impairment was recognised (eg an improvement in the
debtor’s credit rating). The micro-entity shall recognise the amount of the reversal in
profit or loss immediately.

I do question why if the company is an investment company why applying FRS 105 is considered appropriate? Under FRS 102 your client would be able to recognise the investment gains and losses and these would be distributable as the investments are liquid. Instead under FRS 105 you limit your client to the downsides only!

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