I have recently taken role as finance manager for a group of companies, one of which is audited.The accounts extracts are :-
2009
Tangible assets : land and property £900,000 Debit
Revaluation Reserve £600,000 Credit
(so I assume historical cost of £300,000; No depreciation anywhere including historical cost depn note)
2010
Tangible assets : land and property £nil
Stocks & WIP : £2,000,000
Revaluation Reserve £600,000 Credit
2011
I have to prepare the accounts. My gut feel was that there should not be a revaluation reserve which, my professional body confirmed. They said to get rid of it as an exceptional item on face of P&L. My thinking is that I need to :-
- Have an exceptional profit on face of P&L as a PYA (ie restate 2010 uplifting profit by £600,000)
- Restate comparitive STRG&L where the revaluation reserve is unwound
- Explanatory notes
QUESTION
YE stock is about £500k so i am guessing there will be a big PCTCT which logically is correct with a uplift in value of £600k. is my thinking on the accounting transactions correct ?
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Please clarify
What happened to the £900,000 of property in 2009? Are you implying that it was reclassified as stock for resale during 2010 or that it was sold to a third party? Was there any profit/loss on sale of fixed assets in 2010?