How to do a fixed asset investment revaluation on IRIS under FRS 102 1A

How to do a fixed asset investment revaluation on IRIS under FRS 102 1A

Changes in the valuation of fixed asset investment go through the profit and loss accounts under FRS 102 and FRS 102 1A, along with the associated deferred tax. The same process will be used for investment properties and listed investments. (Note that the revaluation of fixed assets such as land and building and plant and machinery used in the trade goes through the Statement of Comprehensive Income, not fair value through the profit and loss)

As with many FRS 102 disclosures and transactions, IRIS have been not particularly great at updating the software so it complies with FRS 102. This means that you have to use ‘fudges’ to make the accounts work. IRIS does not have a code that you can post fixed asset revaluations to in the profit and loss code, so you need to make one up! IRIS have advised that the profit and loss code you should use is “400,” which is an exceptional item!! This means you need to do some work to make the accounts look right!

Assume you have quoted investments and during the period you need to revalue them by £10,000 and that there is deferred tax of £2,000 on the revaluation.

Step 1 – Add the revaluation

  Debit Credit
Listed investment revaluation (code 556/5) 10,000  
Revaluation in P&L (Code 400)   10,000

 

Here I have chosen code 400 as the revaluation code, but according to IRIS you can use any code between 400 and 405. These are grouped under exceptional items so you will need to change the name of the individual code and the group code. Therefore go to posting, then account, and go to ‘specific group descriptions.’ The group (for code 400) is 271, so type 271 and change the name to “gain on financial assets at fair value through profit and loss account.” Also change the name of code 400 to “gain on financial assets at fair value through profit and loss account.”

Since we have posted to an exceptional item code, IRIS automatically includes an exceptional item note in the accounts. You will need to go into data screens and search for “exceptional.” You then change the heading in IRIS to “gain on financial assets at fair value through profit and loss account.”

Step 2 – Add deferred tax

  Debit Credit
Deferred tax (code 450) 2,000  
Revaluation in P&L (Code 931/3)   2,000

 

Step 3 – Move revaluation reserve to undistributed profit code

You move the revaluation net of deferred tax to undistributable profit code, so here we would move £8,000 (£10,000 revaluation less £2,000 deferred tax).

  Debit Credit
Profit & loss transfer (code 968/5) 8,000  
Fair value reserve (Code 974/5)   8,000

 

Because of the quirks of IRIS you will need to change the name of code 968/5 and 974/5 to “Reserve transfer.”

Remember that these postings have no impact on tax, so in the tax computation you need to add back the revaluation that goes through the profit and loss account.

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