Investment property is land or buildings held to earn rent or for capital growth rather than for the company's own use. Under FRS 102 it is carried at fair value, and this note shows how that value moved in the year and how it was arrived at.
What this note shows
The note reconciles the opening and closing fair value:
- Fair value at the end of the previous year
- Additions
- Disposals
- Increase/(decrease) from fair value adjustment
- Transfers from tangible fixed assets
- Fair value at the end of this year
It also explains how fair value was arrived at. The editor points to FRS 102 paragraph 16.10: disclose the method and significant assumptions used to determine fair value, and whether an independent valuer was used. Changes in fair value go through the profit and loss account, and investment property is not depreciated.
The note applies to FRS 102 Section 1A accounts. FRS 105 doesn't allow fair value accounting, so micro-entities carry property at cost less depreciation and don't have this note.
Where the figures come from
Tax Optimiser works one of two ways:
- From the trial balance. If the trial balance has balances on the investment property accounts (Investment property costs b/f, plus the additions, disposals, revaluations and transfers accounts), the note reads them and the figures are read-only. Disposals are credits in the trial balance; the note shows them as a positive figure and deducts them. This keeps the note in line with the balance sheet.
- Typed in. If those accounts aren't used, the boxes are open and you type the figures. They are saved with the period. Check the closing figure agrees to investment property on the balance sheet.
Completing the note in Tax Optimiser
Open the period, choose View Accounts, then Notes in the Actions menu on the left. Select Investment property and set Show this note in the accounts to Yes. When the figures come from the trial balance, the editor says: "These figures come from the investment property accounts in the trial balance, so they always agree with the balance sheet. Adjust the trial balance to change them."
Under the table, the Basis of valuation box is where you describe the valuation, for example "The investment property was valued at fair value on [date] by the directors / by an independent valuer, [name], on an open market value basis." Anything typed there prints beneath the table. Click Save changes to save the note and rebuild the accounts preview.
Wording templates
The Additional note for Investment property section has one template:
- Basis of fair value – "The fair value of the investment property at {{EndDate}} was determined by {{ValuerName}}, {{ValuerQualification}}, on the basis of {{ValuationBasis}}." The period end date is filled in for you. You'll be asked for
{{ValuerName}},{{ValuerQualification}}and{{ValuationBasis}}.
Use either the Basis of valuation box or the template, not both, so the explanation isn't printed twice.
How it appears in the accounts
In the demo accounts the note is note 9. The property is held at a directors' valuation of £200,000 with no change in the year.
Frequently asked questions
Does investment property need a professional valuation?
FRS 102 doesn't require an independent valuation, and directors can value the property themselves. The accounts must say how fair value was determined and whether an independent valuer was involved.
Why can't I edit the investment property figures?
The trial balance has investment property accounts, so the note reads them to stay in line with the balance sheet. Post the movement to the trial balance instead.
Should investment property be depreciated?
Not under FRS 102. It is remeasured to fair value at each year end, and the change goes through the profit and loss account. Micro-entities using FRS 105 hold property at cost and depreciate it.
Where do fair value gains on investment property go?
Through the profit and loss account. Many companies also move the gain, net of deferred tax, to a separate non-distributable reserve. Describe your approach in the investment property accounting policy.
Where to go next
- Guide to the notes to the accounts – how the Notes screen works
- Previous: Tangible fixed assets note
- Next: Dividends note
- Accounting policies
- Deferred taxation note