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Post balance sheet even - adjusting v non adjusting

Post balance sheet even - adjusting v non...

........the fixed asset is land and buildings which were bought for development and resale around six years ago. The market was totally unforeseen and the company expected to turn these around in under a year. Six years later, they still hold the land but have managed to sell the buildings - at a loss of circa £150-200k. The sale took place after the balance sheet date but before the date we are signing the accounts. Having read various guidelines and not feeling any wiser, my question is; - does this post balance sheet event give rise to an adjusting event or a non adjusting event? The land and buildings are currently on the balance sheet at historical cost with no write down. 

Any advice or knowledge would be much appreciated, thanks. 


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30th Jan 2013 16:52

Looks like...

...indications of an impairment which was present at the balance sheet date, which defines an adjusting PBSE.  Unless you have indications that the loss was purely caused by factors which arose post year end?

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By mdoyle
30th Jan 2013 17:32


No, i'd say the factors already existed before balance sheet date so I agree with you.

What I don't know is the actual mechanics of the adjustment in the accounts i.e. to the p&l account, I haven't done this before. The guidelines say it is just posted to the relevant p&l heading. what I forgot to mention is that the purchase of this property is totally outside the trading scope for this company. perhaps the adjustment would be to exceptional items? forgive my stupidity if i'm way off the mark, I haven't had an adjustment like this before. 

Thanks for your help. 

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31st Jan 2013 10:18

Fixed asset?

"the fixed asset is land and buildings which were bought for development and resale around six years ago."

So, I assume that initially they were treated as WIP and subsequently, appropriated to Fixed Assets?  However, if the land and buildings were not occupied by the business for their own trade, they should have been treated as investment properties and carried at their market value without depreciation, rather than at cost.

It is not so much a post balance sheet event, but correction of accounting errors in earlier years.  Either way, it needs to be reflected in the accounts.  If only the buildings have been sold, you need to value the land to be retained in the accounts.  The rest is a loss on sale of fixed assets.  You might wish to disclose some details in a note.

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By mdoyle
31st Jan 2013 11:07

yes, it did start life as WIP but when it seemed impossible for land and buildings to be sold it was appropriated to fixed assets as at that point it looked as if the only option was to try rent the property. The definition of investment property states that 'the construction work and development have been completed', because the property had been empty for six years the whole thing needed renovated again so further costs were incurred. It wasn't as clear cut as one treatment or the other, what didnt help is the purpose of the property kept changing from resale to rental to the director possibly purchasing the property from the company personally so it has been a bit of a mess and I agree the correct treatment to date in the accounts perhaps hasnt been done.

Thanks everyone.

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