RSS feedsQ: I am preparing the accounts for a small owner-managed company with
two investment properties. In the prior year’s accounts, these are shown at
cost. His former advisers told him this is in accordance with IFRS. The
accounts, however, are prepared under the Financial Reporting Standard for
Smaller Entities (FRSSE). As the accounts are required by the Companies Act to
show a true and fair view, what should I do?
A: The responsibility for the accounts to show a true and fair view is
that of the directors. The FRSSE requires that investment properties are
included at their market value at the balance sheet date. The valuation may be
carried out by the directors, although the names of the persons making the
valuation should be disclosed.
The fact that the property has been valued by an employee or officer of the company requires disclosure. It is likely that the value of the properties will be greater than their original cost. This is also likely to have been the case at the previous balance sheet date. Therefore, consider whether a prior year adjustment is required in light of the accounts for that year containing a error.
The company could invoke the voluntary revised financial statements
procedures of the Companies Act.The Companies Act allows all non-charitable
companies to adopt IFRS although the full burden of this would need to be
assessed. The international standard on investment properties, IAS 40, allows
such properties to be included at cost.
James Barbour is director, accounting and
auditing, at ICAS
www.icas.org.uk
