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Disclosures
Extract from FRS102: Section 27.32 – 27.33A
27.32 An entity shall disclose the following for each class of assets indicated in paragraph 27.33:
(a) the amount of impairment losses recognised in profit or loss during the period and the line item(s) in the statement of comprehensive income (or in the income statement, if presented) in which those impairment losses are included; and
(b) the amount of reversals of impairment losses recognised in profit or loss during the period and the line item(s) in the statement of comprehensive income (or in the income statement, if presented) in which those impairment losses are reversed.
27.33 An entity shall disclose the information required by paragraph 27.32 for each of the following classes of asset:
(a) inventories;
(b) property, plant and equipment (including investment property accounted for by the cost method);
(c) goodwill;
(d) intangible assets other than goodwill;
(e) investments in associates; and
(f) investments in joint ventures.
27.33A An entity shall disclose a description of the events and circumstances that led to the recognition or reversal of the impairment loss.
OmniPro comment
See below illustration of the above requirements.
Example 22 – extract from an accounting policy note and disclosure requirements
Property, plant and equipment
(a) Cost
Property, plant and equipment are recorded at historical cost or deemed cost (note include valuation here where appropriate), less accumulated depreciation and impairment losses. Cost includes prime cost, overheads and interest incurred in financing the construction of property, plant and equipment. Capitalisation of interest ceases when the asset is brought into use.
Freehold premises are stated at cost (or deemed cost for freehold premises held at valuation at the date of transition to FRS 102 where the optional transition exemption under S.35.10(a) of FRS 102 has been applied) less accumulated depreciation and accumulated impairment losses.
The company previously adopted a policy of revaluing freehold premises and they were stated at their revalued amount less any subsequent depreciation and accumulated impairment losses. The company has adopted the transition exemption under FRS 102 paragraph 35.10(d) and has elected to use the previous revaluation as deemed cost OR The company has adopted the transition exemption under FRS 102 paragraph 35.10(C) and has elected to use the fair value as deemed cost.
The difference between depreciation based on the deemed cost charged in the profit and loss account and the asset’s original cost is transferred from the non-distributable reserve to retained earnings through equity.
Equipment and fixtures and fittings are stated at cost less accumulated depreciation and accumulated impairment losses.
Where investment property can no longer be reliably measured without undue cost or effort these assets are reclassified to property, plant and equipment at the carrying amount prior to the transfer and depreciated over the useful economic lives.
Spare parts that are acquired as part of an equipment purchase which are only to be used in connection with these specific assets are initially capitalised and amortised as part of the equipment. Spare parts which are expected to be used during more than one period are capitalised as property, plant and equipment.
NOTE: Policy to be included where a policy of revaluation has been chosen:
The company has adopted a policy of revaluing freehold premises. Freehold premises are included in the balance sheet at their fair value on the basis of a periodic professional valuation less accumulated depreciation. The difference between depreciation based on the revalued amount is charged in the profit and loss account and the asset’s original cost is transferred from revaluation reserve to retained earnings. Annually the carrying values are reviewed for appropriateness by the directors. Any changes in the value of freehold properties are reflected as a movement on the revaluation reserve except where the revaluation is below original cost in which case the balance is recognised in the profit and loss account.
To the extent a legal or constructive obligation exists, the acquisition costs include the present value of estimated costs of dismantling and removing the asset and restoring the site. A change in estimated expenditures for dismantling, removal and restoration is added to/and or deducted from carrying value of the related asset. To the extent the change results in a negative carrying amount, the difference is recognised in the profit and loss. The change in depreciation is recognised prospectively.
(b) Depreciation
Depreciation is provided on property, plant and equipment, on a straight-line basis, so as to write off their cost less residual amounts over their useful lives.
The estimated useful lives assigned to property, plant and equipment are as follows:
| Freehold Premises | 2% straight line on cost |
| Motor vehicles | 25% straight line on cost |
| Office equipment, fixtures & fittings | 12½% straight line on cost |
| Computer equipment | 25%/33⅓% straight line on cost |
| Service equipment and spare parts | 10% straight line on cost |
The company’s policy is to review the remaining useful lives and residual values of property, plant and equipment on an on-going basis and where indicators exist adjust the depreciation charge to reflect the remaining estimated life and residual value.
Fully depreciated property, plant & equipment are retained in the cost of property, plant & equipment and related accumulated depreciation until they are removed from service. In the case of disposals, assets and related depreciation are removed from the financial statements and the net amount, less proceeds from disposal, is charged or credited to the income statement.
Impairment
The carrying amounts of the Group’s/Company’s assets, other than inventories (which are carried at the lower of cost and net realisable value), deferred tax assets (which are recognised based on recoverability), investment properties (which are carried at fair value), and those financial instruments, which are carried at fair value, are reviewed to determine whether there is an indication of impairment when an event or transaction indicates that there may be. If any such indication exists, an impairment test is carried out and the asset is written down to its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is defined as the present value of the future pre-tax and interest cash flows obtainable as a result of the asset’s continued use. The pre-tax and interest cash flows are discounted using a pre-tax discount rate that represents the current market risk free rate and the risks inherent in the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. An impairment loss is recognised in the profit and loss account, unless the asset has been revalued when the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. Thereafter any excess is recognised in profit or loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.
An impairment loss, other than in the case of goodwill, is reversed if there has been a change in the estimates used to determine the recoverable amount. If an impairment loss is subsequently reversed, the carrying amount of the asset (or asset’s cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the profit and loss account.
Extract from notes to the financial statements
Exceptional item – impairment charge
|
|
2015 |
2014 |
|
|
CU |
CU |
|
Impairment of property, plant and equipment |
8,000 |
– |
|
Amortisation of deferred grants arising on impairment of related assets |
(500) |
– |
|
|
7,500 |
– |
The directors have reviewed the carrying value of property, plant and equipment, net of associated deferred grants, at the year end in accordance with Section 27 “Impairment of Assets”. As a result, a net impairment loss of CU8,000 (2014: CUNil) has been charged to the profit and loss account for the year. The impairment of CU8,000 represents an impairment of property, plant and equipment net of a release of related deferred grants of CU500. The impairment losses have been allocated to fixed assets categories on a pro-rata basis relative to their pre-impairment carrying values. The impairment loss arose as a result of the material change in the market in which the company operates.
The company’s activities were considered, due to their nature, to form one income-generating unit for the purposes of the impairment review. A pre-tax discount rate of 6%, representing the estimated market rate of return on an investment with equal risk, was applied to the expected future cash flows in the value in use calculation. Value in use was considered to exceed estimated net realisable value. Cash flows have been projected over five years based on management forecasts and budgets. After that a steady growth rate of 1% has been assumed.
Property, plant and equipment note
|
|
Land and Buildings |
Plant and Machinery |
Total |
|
|
CU |
CU |
CU |
|
Cost |
|
|
|
|
At 1 January 2015, 1 January 2014 and 1 January 2013 |
20,000 |
100,000 |
120,000 |
|
Additions |
– |
10,000 |
10,000 |
|
Disposals |
(1,000) |
– |
(1,000) |
|
At 31 December 2015 |
19,000 |
110,000 |
129,000 |
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
At 1 January 2015, 1 January 2014 & 1 January 2013 |
10,000 |
60,000 |
70,000 |
|
Charge for year |
500 |
1,000 |
1,500 |
|
Impairment in year (note 3) |
1,000 |
7,000 |
8,000 |
|
Disposals |
(1,000) |
– |
(1,000) |
|
At 31 December 2015 |
9,500 |
69,000 |
78,500 |
|
Net book value |
|
|
|
|
At 31 December 2015 |
9,500 |
41,000 |
33,500 |
|
At 31 December 2014 |
10,000 |
40,000 |
42,000 |
Extract from profit and loss where impairment is shown as an exceptional item
|
Profit and Loss Account |
|
|
|
|
For the Year Ended 31 December 2015 |
|
|
|
|
|
Notes |
2015 |
2014 |
|
|
|
CU |
CU |
|
Turnover |
1 |
XXXXX |
XXXXX |
|
Cost of sales |
|
(XXXX) |
(XXXX) |
|
|
|
|
|
|
Gross profit |
|
XXXX |
XXXX |
|
|
|
|
|
|
Selling and distribution costs |
|
(XXX) |
(XXX) |
|
Administrative expenses |
|
(XXX) |
(XXX) |
|
Other operating income |
|
XXX |
XXX |
|
|
|
|
|
|
Operating profit |
3 |
900,000 |
XXX |
|
|
|
|
|
|
Operating profit before exceptional item |
|
1,200,000 |
XXX |
|
Impairment of property, plant and equipment |
|
150,000 |
XXX |
|
Restructuring provision |
|
150,000 |
XXX |
|
Operating profit |
|
900,000 |
XXX |
|
|
|
|
|
|
Income from shares in group undertakings |
4 |
XXX |
XXX |
|
Income from shares in other financial assets |
4 |
XXX |
XXX |
|
Income from shares in participating interests |
5 |
XXX |
XXX |
|
|
|
|
|
|
Profit on ordinary activities before interest and taxation |
|
XXXX |
XXXX |
|
|
|
|
|
|
Interest receivable and similar income |
6 |
XXX |
XXX |
|
Interest payable and similar income |
7 |
(XXX) |
(XXX) |
|
|
|
|
|
|
Profit on ordinary activities before taxation |
|
XXXX |
XXXX |
|
Tax on profit on ordinary activities |
8 |
(XXX) |
(XXX) |
|
Profit for the financial year |
|
1,000,000 |
500,000 |
|
Profit for the financial year attributable to: |
|
|
|
|
|
|
|
Owners of the parent company |
1,000,000 |
500,000 |
|
|
1,000,000 |
500,000 |
Extract from notes to the financial statements
Exceptional item – impairment charge
|
|
2015 |
2014 |
|
|
CU |
CU |
|
Restructuring costs (see (i) below) |
8,000 |
– |
|
Impairment of property, plant and equipment |
8,000 |
– |
|
Amortisation of deferred grants arising on impairment of related assets |
(500) |
– |
|
|
7,500 |
– |
(i) During the year the company announced a formal plan to restructure the operations and as a result announced a plan to let employees go. This amount represents the expected cost of redundancy as a result of this decision.
(ii) The directors have reviewed the carrying value of property, plant and equipment, net of associated deferred grants, at the year end in accordance with Section 27 “Impairment of Assets”. As a result, a net impairment loss of CU8,000 (2014: CUNil) has been charged to the profit and loss account for the year. The impairment of CU8,000 represents an impairment of property, plant and equipment net of a release of related deferred grants of CU500. The impairment losses have been allocated to fixed assets categories on a pro-rata basis relative to their pre-impairment carrying values. The impairment loss arose as a result of the material change in the market in which the company operates. Deferred tax has been recognised as a result of this adjustment.
The company’s activities were considered, due to their nature, to form one income-generating unit for the purposes of the impairment review. A pre-tax discount rate of 6%, representing the estimated market rate of return on an investment with equal risk, was applied to the expected future cash flows in the value in use calculation. Value in use was considered to exceed estimated net realisable value. Cash flows have been projected over five years based on management forecasts and budgets. After that a steady growth rate of 1% has been assumed.
|
Exceptional item |
2015 |
2014 |
|
|
CU |
CU |
|
Administrative expenses in the profit and loss account includes the following exceptional charges: |
|
|
|
|
|
|
|
Provision against investment in subsidiary/joint venture/associate |
XX |
XX |
|
|
XX |
XX |
Extract from notes where impairment is not deemed exceptional
OPERATING PROFIT
Operating profit is stated after charging/(crediting):
|
|
2015 |
2014 |
|
|
CU |
CU |
|
Depreciation |
149,999 |
170,037 |
|
Directors’ remuneration: |
212,000 |
225,600 |
|
Impairment of goodwill (included within administrative expenses) |
– |
– |
|
Impairment of property, plant and equipment (included within administrative expenses) |
– |
– |
|
Impairment of investment in subsidiary/associate/joint venture |
– |
– |
|
Reversal of impairment of property, plant and equipment (included within administrative expenses) See note 1 |
– |
– |
|
Reversal of impairment of goodwill/intangibles (included within administrative expenses) |
– |
– |
|
Reversal of impairment of inventory (included within cost of sales) |
– |
– |
|
Impairment of inventory (included within cost of sales) |
– |
– |
|
Inventory recognised as an expense |
– |
– |
|
Auditors’ remuneration |
|
|
|
Audit |
13,000 |
13,000 |
|
Non audit services |
3,000 |
3,000 |
|
Tax Advisory |
3,225 |
3,225 |
Note 1:
The directors have reviewed the carrying value of property, plant and equipment, net of associated deferred grants, at the year end in accordance with Section 27 “Impairment of Assets”. As a result of this exercise performed, a reversal of a previous impairment loss of CU8,000 (2014: CUNil) has been credited to the profit and loss account for the year. The reversal of the impairment of CU8,000 represents a reversal of an impairment of property, plant and equipment net of a release of related deferred grants of CU500. The reversal of the impairment loss previously recognised has been allocated to fixed assets categories on a pro-rata basis relative to their post-impairment carrying values at the date of the reversal. The amount of impairment reversed was limited to the amount the fixed assets would have been carried at if no impairment had previously been booked.
The company’s activities were considered, due to their nature, to form one income-generating unit for the purposes of the impairment review. A pre-tax discount rate of 6%, representing the estimated market rate of return on an investment with equal risk, was applied to the expected future cash flows in the value in use calculation. Value in use was considered to exceed estimated net realisable value. Cash flows have been projected over five years based on management forecasts and budgets. After that a steady growth rate of 1% has been assumed. The reversal of the impairment arose due to the fact that the market in which the company operates has significantly improved and the previous estimates included in the initial impairment review were too pessimistic.
Extract from notes to the financial statements for an entity that holds an associate/subsidiary/joint venture/other interest but is not required to prepare consolidated financial statements – Financial asset note
|
Financial assets |
|
Subsidiary Undertakings |
Joint Venture and associates |
Other investments |
Total |
|
|
|
CU |
CU |
CU |
CU |
|
Cost |
|
|
|
|
|
|
At 1 January 2015, 1 January 2014 & 1 January 2013 |
|
XXX |
XXX |
XXX |
XXX |
|
Additions |
|
XXX |
XXX |
XXX |
XXX |
|
Fair value adjustments |
|
XXX |
– |
XXX |
|
|
Disposals |
|
– |
(XXX) |
– |
(XXX) |
|
At 31 December 2015 |
|
XXX |
XXX |
XXX |
XXX |
|
Amounts provided: |
|
|
|
|
|
|
At 1 January 2015, 1 January 2014 & 1 January 2013 |
|
XXX |
– |
XXX |
XXX |
|
Additional provision/impairment |
|
XXX |
– |
– |
XXX |
|
At 31 December 2015 |
|
XXX |
XXX |
XXX |
XXX |
|
Carrying amount |
|
|
|
|
|
|
At 31 December 2015 |
|
XXXX |
XXXX |
XXXX |
XXXX |
|
At 31 December 2014 |
|
XXXX |
XXXX |
XXXX |
XXXX |
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