FRS 15 Tangible Fixed
Assets
Valuation
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
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
FRS 15 Tangible Fixed
Assets
Valuation’s Cont’d
 Full valuation at least every five years,
interim in year 3
 Where ‘material’ change in value likely, revalue in years 1,2,4 also
 Material ‘reasonably influence the decisions
of a user of the accounts’
 Full valuation conducted by qualified valuer
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
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
P&L
a/c.
(physical
damage,
deterioration in quality of service
provided by asset)
FRS 15 Tangible Fixed
Assets
Reporting Gains on Revaluation
v 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
v All other revaluation gains should be
recognised in the STRGL
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 P&L
FRS 15 Tangible Fixed
Assets
Gains/Losses on Disposal
 Include in the P&L the difference
between:
– Net sales proceeds
– Carrying amount

(Per FRS 3)
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
FRS 15 Tangible Fixed
Assets
Depreciation
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 P&L account
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
FRS 15 Tangible Fixed
Assets
Where asset re-valued:
 Depreciation is based on re-valued
amount

Depreciation is
remaining UEL
based
on
the
FRS 15 Tangible Fixed
Assets
Methods of Depreciation:
 Most Common
– Straight-line
– Reducing balance

If uncertain of consumption of benefits
– use straight line
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
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)
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
FRS 15 Tangible Fixed
Assets

However, some TFAs may have very
long useful economic lives and thus
the depreciation charge may be
immaterial
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
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
FRS 15 Tangible Fixed
Assets
Disclosures
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
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,
revaluations,
transfers,
depreciation,
impairment losses, and reversals of past
impairment losses written back
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.