FRS105 investment property depn period

Under FRS105 what depreciation period are companies using for investment properties?

Didn't find your answer?

Hi all,

FRS105.12 Property, Plant and Equipment and Investment Property states that assets should be depreciated over their useful economic lives and that land and buildings should be accounted for separately.

On a freehold investment property, is there a case for considering that the residual value of the property, with its value being more than the cost, effectively renders the depreciation nil?

Would that be a fair thing to do?

Replies (5)

Please login or register to join the discussion.

John Toon
By John Toon
16th Nov 2022 14:25

If that's what your accounting policy says, then yes

Thanks (0)
paddle steamer
16th Nov 2022 14:25

Surely residual value of the property element runs to nil, effectively when a building/structure is finished productive use all value rests in the land, in fact the building possibly has a negative value as it has a demolition cost.

If you look at them as two assets, which I think FRS105 wishes you to do, you cannot within FRS105 increase the value of the land above its cost and the building element, having a finite economic life, needs depreciated towards it eventually becoming a pile of dust only useable as site infill.

I get past all these mind games by using FRS102 instead, imho FRS105 is not fit for purpose re Investment Properties.

Thanks (3)
Replying to DJKL:
By paul.benny
16th Nov 2022 14:52


Those who would not depreciate freehold property overlook the requirement in FRS105 12.15 to split out the initial cost.

Thanks (1)
Replying to paul.benny:
By Tax is always taxing
16th Nov 2022 15:49

This chat is giving me flashbacks of when component accounting was introduced for housing associations.
Does FRS105 12.15 not imply that a similar approach should be followed (not suggesting anyone would) - but roof, kitchens, bathrooms, windows etc all have different useful life to the structure of the building itself - and of course the land. Should the original cost be allocated between these original components if you take the standards to the extreme?

Thanks (0)
Replying to Tax is always taxing:
By Bobbo
16th Nov 2022 16:35

That is indeed precisely what that paragraph is saying. Have fun OP

Thanks (0)