The introduction of FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ has resulted in some questions being asked by accountants concerning some of the accounting treatments within the new regime.
One of the most frequently asked questions relates to items of fixed assets that were previously carried under the revaluation model or at open market value (i.e. investment property) and the impact that new UK GAAP has on the accounting for such assets.
At the outset it is worth pointing out that FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime does not allow any assets to be carried at revaluation or at fair value.
This is not something the Financial Reporting Council have brought in. It is because the EU Accounting Directive does not recognise any of the fair value accounting rules or the alternative accounting rules – hence on transition to FRS 105 such micro-entities will have to remove any revaluation amounts or fair values (in paragraph 28.10(c) FRS 105 provides guidance on how to deal with this issue when a micro-entity has an investment property on its balance sheet and is reporting under FRS 105).
Section 17 Property, Plant and Equipment
Section 17 Property, Plant and Equipment in FRS 102 allows a reporting entity to carry property, plant and equipment (PPE) at cost or at revaluation. Unlike FRS 15 Tangible fixed assets, FRS 102 does not specifically require revaluations to be carried out every five years, with valuations in the intervening years where there has been a material change in valuation.
Instead, the standard requires revaluations to be carried out with ‘sufficient regularity’, noting that the carrying amount of the asset(s) should not differ materially from its fair value at the reporting date when the revaluation model is used....
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