Exchange of Asset in Statement of Accounts

Hello,

We have exchanged one fire station for another with a contractor and are quite content with the treatment as per the Code (bottom of page 531) assuming the exchange has no commercial substance.

I'm not so sure about how to present it in the PPE note and the CAA note and would very much appreciate any suggestions.

In the PPE note the write out of the old asset I'd assume sits in the "Derecognition - disposals" line but not sure that the new asset fits in with "Additions". Our Auditors will want to reconcile capital expenditure with that line but I can't see where else it would go - any thoughts?

In the CAA note the write out of the old asset I'd assume sits in the "Amounts of non-current assets written off..." but note sure where the new asset financing goes. Does it just net off on the same line which seems to fit as it comes from "CIES - other operating expenditure". It is not a "Capital grant" or a "Donated asset" so at a loss - again, any thoughts?

Many thanks,

Phill

Parents
  • Hi Phill, 

    I'd like to introduce myself as the editor of the TISonline Financial Management and Corporate Governance stream. I asked the board for views on your question, and received the following response: 

    "Assume that the exchange has no economic value, the assets are in the same class, they are valued by the same method and both have the same carrying amount. These are options you may want to consider:

    1. I would not show a disposal and acquisition in the PPE note. If this were done the disposal should be included in the gain or loss on disposal and credited or debited to the CIES and a profit or loss should not be recognised (page 531). There is no funding for the acquisition and no capital expenditure so you do not want to mess up your capital expenditure and funding. As both assets have the same carrying amount there will be no net movement relating to these assets in the CFR so no MRP liability.

    2. Net off the derecognition and recognition in the PPE note ie show nothing in the note except any depreciation on disposal. If you did this you would need to net off the entries in the CIES, CAA and General Fund. This depends on materiality and the view of your external auditor.

    3. You can expand any of the notes you want. You could therefore, say, add 2 lines to the cost or valuation section of the PPE note to credit asset written out on exchange and debit asset recognised on exchange. If you did this you should also separately disclose depreciation on asset written out on exchange in the accumulated depreciation and impairment section. This would just leave your 'ordinary' disposals to go to the CIES which would match disposals and disposals depreciation in the PPE note (excluding any capital receipts). You can also separately disclose the 2 entries in the CAA. A note in the accounts explaining the transaction would be useful.

    4. Agree with your auditor that it not a donated asset."

    I hope that you find this information useful. 

Reply
  • Hi Phill, 

    I'd like to introduce myself as the editor of the TISonline Financial Management and Corporate Governance stream. I asked the board for views on your question, and received the following response: 

    "Assume that the exchange has no economic value, the assets are in the same class, they are valued by the same method and both have the same carrying amount. These are options you may want to consider:

    1. I would not show a disposal and acquisition in the PPE note. If this were done the disposal should be included in the gain or loss on disposal and credited or debited to the CIES and a profit or loss should not be recognised (page 531). There is no funding for the acquisition and no capital expenditure so you do not want to mess up your capital expenditure and funding. As both assets have the same carrying amount there will be no net movement relating to these assets in the CFR so no MRP liability.

    2. Net off the derecognition and recognition in the PPE note ie show nothing in the note except any depreciation on disposal. If you did this you would need to net off the entries in the CIES, CAA and General Fund. This depends on materiality and the view of your external auditor.

    3. You can expand any of the notes you want. You could therefore, say, add 2 lines to the cost or valuation section of the PPE note to credit asset written out on exchange and debit asset recognised on exchange. If you did this you should also separately disclose depreciation on asset written out on exchange in the accumulated depreciation and impairment section. This would just leave your 'ordinary' disposals to go to the CIES which would match disposals and disposals depreciation in the PPE note (excluding any capital receipts). You can also separately disclose the 2 entries in the CAA. A note in the accounts explaining the transaction would be useful.

    4. Agree with your auditor that it not a donated asset."

    I hope that you find this information useful. 

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