Purchase of Assets at well below value

How do I best leverage and account for assets purchased as a deal?

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Good morning,

I'm hoping for some suggestions and assistance on how I can best make use of a deal I have made with a previous employer for the purchase of assets.

The offer I have taken up is to purchase the assets of a project which I previously managed for a nominal value, in this case £800. The assets sit in two categories, a microwave based radio network which has been in operation for about five years, and components of a phase of that project which were purchased but never used.

In the first category I have an 18m lattice tower radio mast, the concrete equipment cabin, 2 x high end microwave links and various other equipment. Some of this will be stripped out and re-used in our own offices, other components may be used to provide services to clients, or if that doesn't go anywhere, sold on. All in, it was ~£20,000 at installation.

In the second category (unused equipment) there is a large generator and some other enclosures and electrical equipment, purchased about 30 months ago. All in, the purchase price was ~£10,000 at that time - it is all still wrapped in original packaging, totally unused. Again ideally these will be used for services, but may be sold if that's not forthcoming in the next 6-12 months.

The crux of the matter is how do I account for these? The business is around £75k annual turnover, two years trading, both loss-making at the moment due to a large amount of product development work & R&D, with this third year forecast to be break-even. The second year loss is likely to be £30k or so, and this purchase is within that second financial year, so a reduction in loss would be ideal.

My limited accountancy understanding suggests that these can only appear on asset register at cost (i.e. £800) whereas true value is significantly higher (resale value of all of above, realistically £15-20k minimum). Is this correct, or is there some other approach I'm missing? I have seen some mentions of revaluation reserves, but the fine points of this are way above my head.

Thanks in advance for any assistance you can give.

 

Replies (3)

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By 356B
30th Mar 2018 11:42

Record them as Fixed Assets at a cost of £800. Claim CAs on this value.

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By andy.partridge
30th Mar 2018 22:07

It might be relevant to know how you have acquired the kit at a knockdown price and, in particular, if there are strings attached.

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Replying to andy.partridge:
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By External Reality Limited
30th Mar 2018 22:27

The equipment is from a project and installation I used to run, which is now redundant, and the purchase at that price is due to my relationship with that company.
Only conditions are that I am responsible for costs of removal of equipment at two sites, which is my time and possibly £200-300 for access hire.

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