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FRS 102: revaluation of property assets

26th January, 2016

Transition to the new FRS 102 accounting standard will allow business owners to inject a one-off boost to the balance sheet, with a revaluation of land and buildings. It also relaxes the requirements for ongoing property revaluations as Jack Moore, chartered accountant at Clayton & Brewill in Nottingham explains.

Jack Moore, chartered accountant with Clayton & Brewill in Nottingham

Jack Moore

If you have a property asset sat on the balance sheet at, say, £150,000 but with an actual value of £1 million, FRS 102 would allow you to have a final ‘one off’ valuation at transition date and for this valuation to be used as the deemed cost. This means you don’t have to apply a policy of revaluation going forward and can then revert to a depreciation method.

This can also work for plant and machinery but be aware that you have to apply the valuation to the whole class of plant and machinery. It’s the same for property but is generally more manageable as fewer property assets are held.

Under the old accounting rules, if you opted to revalue your property, you would then have needed to maintain this policy of revaluation every year – an expensive and time-consuming exercise.

Under FRS 102, the requirements simply state that ‘revaluations are carried out with sufficient regularity to ensure the carrying value does not differ materially from the fair value at the end of the reporting period.’

In other words, FRS 102 gives business owners a one-off opportunity to revalue their property assets and then revert back to accounting for them on a depreciation basis.

A revaluation of property assets will boost profits (on paper) so it will be a clear benefit to a company that wants to be able to show a stronger balance sheet, whether for funding purposes or to reassure suppliers.

A revaluation is likely to result in a substantial gain to the revaluation reserve, which can then be released to the profit and loss. Note that this will not affect profits available for distribution because they are unrealised – ie: the gains are not readily convertible into cash.

And what’s the downside of a one-off revaluation?

You’ll probably need to invest in having a professional valuation, particularly if you’ve held the land or property for a long time. Where the revaluation results in a significant boost to the net asset base it is also worth bearing in mind that it could tip your business over the audit threshold, with a potential doubling or tripling of accountancy costs…

What is FRS 102?

The government has introduced the changes within FRS 102 to modernise the current accounting standards, deliver better reporting, and harmonise the UK with international accounting procedures.

The changes affect the way businesses have to present their accounts (including more disclosure requirements) and could have a significant impact on tax positions.

The current UKGAAP accounting standard is being replaced with FRS 102. For medium and large unlisted businesses, FRS 102 has been effective for accounting periods that started on or after 01/01/2015. For small businesses, FRS 102 applies to accounting periods that begin on or after 1 January 2016. Micro businesses are currently exempt from FRS 102.

The definition of what constitutes a micro business and a small business changes regularly. Please contact us for the latest thresholds.

Call Clayton & Brewill on 0115 950 3044 or click here to send us an email.


Clayton & Brewill is a firm of chartered accountants in Nottingham, Long Eaton and Melton Mowbray. It provides audit, tax and advisory services to individuals, owner managed businesses, SMEs, farmers, landlords, and GPs across the Midlands.
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