Abstract
The category of ‘investment properties’ (defined at 2.1 below) was invented by the property industry in the late 1970s as a means of avoiding the requirement to depreciate buildings. The property industry has argued consistently that it is inappropriate to depreciate investment properties, as it is the current value of such properties which is of prime importance as a measure of performance. Lobbying by the property industry and others led to temporary exemption for investment properties when SSAP 121 was published in December 1977, requiring all assets with finite useful lives to be depreciated. The temporary exemption was originally intended to last for one year, but was extended first for a further year and subsequently for a further 18 months before S SAP 192 became effective, and SSAP 12 was then amended to make the exemption for investment properties permanent.
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References
SSAP 12, Accounting for depreciation, December 1977, para. 22.
SSAP 19, Accounting for investment properties, November 1981.
CA 85, s 228(5).
ED 26, Accounting for investment properties — an addition to SSAP 12 ‘Accounting for depreciation’, September 1980.
Statement by the Accounting Standards Committee on the publication of ED 26 ‘Accounting for investment properties’, paras. 7 and 8.
SSAP 19, para. 7.
Ibid., para. 8.
Ibid., para. 9.
Ibid., paras. 10 and 11.
Ibid., para. 6.
Ibid., para. 13.
Ibid., para. 15.
Ibid., para. 12.
CA 85, s 228(6).
Ibid., Sch. 4, paras. 19 and 34.
See, for example, The British Land Company PLC, Annual Report and Accounts 1991, pp. 21, 25, 29 and 31; Capital & Counties plc, Annual Report and Accounts 1991, pp. 27, 31, 37 and 41; and Slough Estates plc, Annual Report 1991, pp. 40, 43 and 49.
See, for example, McKay Securities PLC, Report and Financial Statements 1991, pp. 16, 17 and 20; and Land Securities PLC, Report and Financial Statements 1992, pp. 33 and 39.
IAS 25, Accounting for Investments, March 1986, para. 48.
ED 51, Accounting for fixed assets and revaluations, para. 79.
Ibid., para. 95.
SSAP 19, para. 13.
CA 85, Sch. 4, para. 34(2).
SSAP 19, para. 15.
CA 85, Sch. 4, para. 8.
Ibid., para. 3(3).
See, for example, Capital & Counties plc, Annual Report and Accounts 1991, p. 29.
Capital & Counties plc gives the information in its balance sheet (Annual Report and Accounts 1991, p. 29), whilst MEPC plc gives it in the notes (Report and financial Statements 1991, p. 34).
CA 85, Sch. 4, para. 3(4).
APB Opinion No. 6, Status of Accounting Research Bulletins, October 1965, para. 17.
IAS 25, para. 45.
Ibid.
Ibid., para. 47.
Ibid.
Ibid.
Ibid., para. 48.
Ibid., para. 51(a).
Ibid., para. 55.
E32, Comparability of Financial Statements, January 1989, para. 203.
Ibid., para. 220.
Statement of Intent, Comparability of Financial Statements, IASC, July 1990.
CA 85, Sch. 4, para. 3(6).
See SSAP 6, para. 30 for the definition of ‘extraordinary items’. In terms of this definition, extraordinary items are ‘expected not to recur frequently or regularly’.
FRED 1, The Structure of Financial Statements — Reporting of Financial Performance, para. 75.
Ibid.
Information Sheet No. 2, UITF, 15 April 1992.
UITF 4, Transfers from Current Assets to Fixed Assets, July 1992, para. 2.
Ibid., para. 5.
Ibid., para. 7.
See Daejan Holdings PLC, Annual Report 1991, p. 13 for an example of a company including service charges in turnover. Great Portland Estates PLC excludes service charges from its equivalent of turnover. It is also an example of a company not defining any figure as turnover — see its 1992 Annual Report, pp. 16, 19 and 20. Daejan Holdings PLC is an example of a company including proceeds on sale of investment properties in turnover.
CA 85, Sch. 4, para. 95.
Ibid., para. 53(5).
SSAP 21 does not categorically state that the disclosure should exclude service charges but this is implicit from paras. 43 and 60. The disclosure should be split between finance and operating leases but most property leases will be operating leases as they do not transfer substantially all the risks and rewards of ownership.
SSAP 21, para. 56.
Osborn’s Concise Law Dictionary describes ground rent as follows: ‘When land is leased to a person on condition that he erects certain buildings on it, the rent reserved (which is small in comparison with the rent of the land when built on) is called the ground-rent.’ (p. 286). Given that ground rent relates to the site itself which to all intents and purposes has an infinite life, this particular lease will not usually transfer substantially all the risks and rewards of ownership and will, therefore, be an operating lease. See SSAP 21, paras. 15–17.
CA 85, s 266.
EC Fourth Directive, Article 5(1).
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© 1992 Ernst & Young
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Davies, M., Paterson, R., Wilson, A. (1992). Investment properties. In: UK Gaap. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12998-0_7
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