Accounting for investment property under new UK GAAP

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Many (if not all) accountants are aware that UK GAAP in its current form is set for significant change and it is likely that the Financial Reporting Council (FRC) will announce this year that the new ‘Financial Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102) will be implemented for accounting periods commencing on or after 1 January 2015 following the comment period which closed on 30 April 2012, explains Steve Collings.

There are some notable differences between current UK GAAP and the new FRS 102 which have been discussed in previous articles. There is one significant change in the new FRS 102 that has caused an element of controversy among accountants, which is the proposed accounting treatment for investment property.

Many clients (including those that report under the FRSSE (effective April 2008)) hold investment property on the balance sheet. Those companies that are not eligible to use the FRSSE (effective April 2008) will account for investment property under SSAP 19 Accounting for Investment Properties

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About Steven Collings


Steve Collings, FMAAT FCCA is the audit and technical partner at Leavitt Walmsley Associates Ltd where Steve trained and qualified.


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17th Jul 2012 15:41

Decrease in value

article does not say much about "decrease in value". Would that be a tax-deductible item in profit and loss account?

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By Bryan
17th Jul 2012 16:20

Proposed treatment
I am a bit mystified by the approach of the ASB here. If they are basing UK GAAP on an IFRS framework, which they are, they seem to be inconsistent in their approach here. Either put fair value adjustments through P&L or not. As I understand it (and it's a while since I did anything to do with IAS) all fair values adjustments hit P&L as the article says but then the ASB seem to be offering a choice of sticking to what occurs now which is likely to lead to a heck of more inconsistencies than if they did away with the revaluation reserve in its entirety and just stuck to a uniform treatment. Surely the ASB's aim is to achieve more consistency is it not?
I also think many will be a bit peeved to have to recognise deferred tax on revaluations!

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17th Jul 2012 21:31

Disclosure of non distributable reserve

Thanks Steve for the article,

Reflecting such revaluation gain on the face of P/L will certainly create confusion. As, it is the bottom line figure in P/L which goes to distributable reserves. It may be difficult for non accountant owner - managers in the company to understand the concept. They will probably say 'our business earned a net profit after tax of £xxx,  so we should be able to take that profit at home'?

The presentation on the face of P/L should be clear to follow for investors.







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By Mallock
18th Jul 2012 11:44

Transfer Between Reserves

Surely the simplest thing is just to do a transfer between P & L Reserves and Revaluation Reserve for the revaluation amount and in that way you keep the distributable profits "clean" on the face of the Balance Sheet.

I don't see that these changes add anything to the clarity of accounts but as with most changes we just have to make the best of it.  

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