Financial Reporting

More Practical Questions and Answers

Steve Collings offers some more practical solutions to frequently asked technical queries as some areas of financial reporting are particularly complex and in many cases accountants will revert back to official standards or publications which may result in complexities becoming even more confusing.

 

Q: I have a building which is carried in the balance sheet using the revaluation model. Do I have to revalue this building every year?

 

A: FRS 15 requires valuations to be kept up-to-date as out-of-date valuations are meaningless where the revaluation model is used. FRS 15 does not require valuations to be carried out every year but a full valuation should be performed every five years with an interim valuation being carried out in the third year after the full valuation. Interim valuations should only be carried out in the intervening years where it is likely there has been a material change in value.

 

Q: I have had a visit from my professional institute who have said that a material debtor, falling due after one year should be disclosed separately on the face of the balance sheet. Is this correct?

 

A: UITF 4 requires that where the amount is so material in the context of the total net current assets that readers may misinterpret the financial statements, separate disclosure on the face of the balance sheet should be made.

 

Q: I have a client who factors its debts. Could you tell me what the required treatment in the accounts is?

 

A: Where the client does not retain any significant benefits and risks and also has no obligation to repay amounts received from the factor, then the debts should be removed from the balance sheet and consequently no liability is to be shown in respect of the proceeds from the factor. Where the criteria for ‘linked presentation’ are met, the proceeds (to the extent that they are non-returnable) should be shown deducted from the gross amount of the factored debts on the face of the balance sheet. The criteria for ‘linked presentation’ are:

 

• The exposure to loss is limited to a fixed monetary amount.

• The Factor has no recourse to other assets.

• The company has no right to reacquire the debts or the factor to return them.

 

 

 

Steve Collings FMAAT ACCA DipIFRS is audit and technical manager at LWA Ltd and a partner in AccountancyStudents.co.uk. He is also the author of ‘The Core Aspects of IFRS and IAS’ and lectures on financial reporting and auditing issues.