FRS 15 Tangible Fixed Assets

1
FRS 15 Tangible Fixed Assets

• Valuation

2
FRS 15 Tangible Fixed Assets

• 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

3
FRS 15 Tangible Fixed Assets

• 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

4
FRS 15 Tangible Fixed Assets

• Valuations Contd
• 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

5
FRS 15 Tangible Fixed Assets

• 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

6
FRS 15 Tangible Fixed Assets

• Reporting Revaluation Losses
• All reval losses that are caused by a clear
  consumption of economic benefits should be
  recognised in the PL a/c. (physical damage,
  deterioration in quality of service provided by
  asset)

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FRS 15 Tangible Fixed Assets

• Reporting Gains on Revaluation
• v  Revaluation gains should be recognised in the
  PL 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 PL a/c
• v All other revaluation gains should be
  recognised in the STRGL

8
FRS 15 Tangible Fixed Assets

• 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 PL

9
FRS 15 Tangible Fixed Assets

• Gains/Losses on Disposal
• Include in the PL the difference between
• Net sales proceeds
• Carrying amount
• (Per FRS 3)

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FRS 15 Tangible Fixed Assets

• 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

11
FRS 15 Tangible Fixed Assets

• Depreciation

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FRS 15 Tangible Fixed Assets

• 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 PL account

13
FRS 15 Tangible Fixed Assets

• 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

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FRS 15 Tangible Fixed Assets

• Where asset re-valued
• Depreciation is based on re-valued amount
• Depreciation is based on the remaining UEL
•  

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FRS 15 Tangible Fixed Assets

• Methods of Depreciation
• Most Common
• Straight-line
• Reducing balance
• If uncertain of consumption of benefits use
  straight line

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FRS 15 Tangible Fixed Assets

• 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

17
FRS 15 Tangible Fixed Assets

• 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)

18
FRS 15 Tangible Fixed Assets

• 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

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FRS 15 Tangible Fixed Assets

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

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FRS 15 Tangible Fixed Assets

• 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

21
FRS 15 Tangible Fixed Assets

• 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

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FRS 15 Tangible Fixed Assets

• Disclosures

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FRS 15 Tangible Fixed Assets

• 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

24
FRS 15 Tangible Fixed Assets

• 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

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FRS 15 Tangible Fixed Assets

• 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.