Sample Disclosure – Change In Accounting Policy Adoption Of FRS 140 Investment Property (30 October 2009)

Change In Accounting Policy As A Result Of Adoption Of FRS 140: Investment Property

The adoption of this new FRS has resulted in a change in accounting policy for investment properties. Investment properties of the Company are now stated at fair value, representing the open-market value determined by external professional firm of valuers engaged by the Company. Gains or losses arising from changes in the fair values of investment properties are recognised in the income statement in the period in which they arise.

Prior to 1 January 2006, investment properties of the Company were stated at valuation amounts as a result of revaluation exercises carried out by the Company. The revaluation exercises were carried out at least once every five years and any revaluation increase arising from the revaluations is credited to equity revaluation reserve account, except when the increase is recognised in the income statement to the extent that it reverses a revaluation decrease of the same investment properties previously recognised in income statement. Any revaluation decrease arising from the revaluation is recognised in income statement, except when the decrease is debited to the equity revaluation reserve account to the extent of any credit balance existing in the revaluation reserve account in respect of that investment property.  The balance of equity revaluation reserve amount is transferred directly to retained earnings when the property is retired or disposed of.

The investment properties of the Company were last revalued in Year 2005. In accordance with the transitional provisions of FRS 140, this change in accounting policy is applied prospectively and the comparatives as at 31 December 2005 are not restated. Instead, the changes have been accounted for as an adjustment to the current year opening balances as at 1 January 2006:





Decrease in revaluation reserve account


Increase in retained earnings



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