FRS 15 Tangible Fixed Assets Valuation. FRS 15 Tangible Fixed Assets Valuation: Carrying value of TFA: –Fixed Assets may be stated at Historical Cost

FRS 15 Tangible Fixed Assets

Valuation


Valuation: Carrying value of TFA:

– Fixed Assets may be stated at Historical Cost less depreciation or

– Fixed assets may be stated at Current Value less depreciation

Carrying value should never exceed recoverable amount


Valuation: TFA should be re-valued only where

the entity adopts a policy of revaluation Apply to individual classes of TFA Where a TFA is re-valued, its carrying

amount should be its current value at BS date

Annual revals are not required


Valuation’s Cont’d Full valuation at least every five years,

interim in year 3 Where ‘material’ change in value likely, re-

value in years 1,2,4 also Material ‘reasonably influence the decisions

of a user of the accounts’ Full valuation conducted by qualified valuer


Class of Assets: All TFA of same class should be re-valued Companies Legislation categories:

– Land and Buildings– Plant & Machinery– Fixtures, fittings, tools & equipment

Companies may adopt other, narrower classes, as appropriate to their business


Reporting Revaluation Losses: All reval losses that are caused by a

clear consumption of economic benefits should be recognised in the P&L a/c. (physical damage, deterioration in quality of service provided by asset)


Reporting Gains on Revaluation

Revaluation gains should be recognised in the P&L a/c only to the extent (after adjusting for subsequent depreciation) that they reverse revaluation losses on the same asset that were previously recognised in the P&L a/c

All other revaluation gains should be recognised in the STRGL


Material gains and losses on revaluation on individual assets in a class of asset should not be aggregated for purposes of deciding whether G/Ls go in STRGL or P&L


Gains/Losses on Disposal Include in the P&L the difference

between:– Net sales proceeds

– Carrying amount (Per FRS 3)


Disclosures where assets revalued: For each class of re-valued assets:

– Names and qualifications of valuers– Basis of valuation– Date and amount of valuation– Carrying amount had assets been included

under HC– Whether the person carrying out the valuation is

internal or external– Where valuation had not been updated or is not

a full valuation, the date of the last full valuation


Depreciation


Depreciation Depreciable Amount of TFA should be

allocated on a systematic basis over its useful economic life.

The depreciation method used should reflect as fairly as possible the pattern in which economic benefits are consumed

Depreciation charge for each period is expensed to the P&L account


Objective of Depreciation: Reflect the cost of use of the TFA in the

period

That is the amount of economic benefit consumed

The cost to the entity of using the asset to generate its revenues


Where asset re-valued: Depreciation is based on re-valued

amount

Depreciation is based on the remaining UEL


Methods of Depreciation: Most Common

– Straight-line– Reducing balance

If uncertain of consumption of benefits – use straight line


Change from one method to another: Only to give a fairer presentation of the

results and financial position

This is not a change of accounting policy


Where TFA comprises two or more major components with substantially different UEL, each component should be accounted for separately for depreciation purposes (e.g. land and buildings, buildings and the fittings)


Non-depreciation of TFA?– Maintenance or refurbishment is carried

out regularly, significantly extending the UEL or maintaining the Residual Value of the asset

– ASB states that subsequent expenditure that maintains or enhances the previously assessed standard of performance of the asset does not negate the need to charge depreciation


However, some TFAs may have very long useful economic lives and thus the depreciation charge may be immaterial


When No Depreciation is permissable: Land Depreciation may not be charged

where that charge would be immaterial:– Depreciation may be immaterial if:

Asset has a very long useful life Asset has a high residual value


UEL and Residual Value UEL should be reviewed at the end of each

period and revised if expectations are significantly different from previous estimates

Where residual value is material, it should be reviewed at the end of each reporting period to take account of expected technological changes based on prices prevailing at the date of acquisition


Disclosures


Disclosures:The following information should be disclosed

separately in the FS for each Class of TFA Depreciation method UEL Total depreciation charged Financial effect of a change during the

period in either the estimate of UEL or the estimate of residual values


Cost or re-valued amount at beginning and at BS date

Cumulative amount of provisions for depreciation or impairment at the beginning of the period and at BS date

Reconciliation of movements, separately disclosing additions, disposals, re-valuations, transfers, depreciation, impairment losses, and reversals of past impairment losses written back


Net carrying amount at beginning and at BS date

Where there is a change in depreciation method, the effect, and reason for the change should be disclosed.

Documents

FRS 15 Tangible Fixed Assets Valuation. FRS 15 Tangible Fixed Assets Valuation: Carrying value of TFA: –Fixed Assets may be stated at Historical Cost