FRS102 has led to many changes in the way we account for things and investment property is a prime example.
The fair value of investment properties changes over time, generally, it goes up in value.
The reporting of gains and losses under old and new UK GAAP differs fundamentally.
Under FRS 102, annual changes in the fair value of Investment Properties are taken to profit or loss, whereas under SSAP 19, equivalent gains and losses were taken in most cases to the Statement of Recognised Gains and Losses. This may have a significant impact on reported performance. The resultant earnings volatility may need to be explained to lenders and other users of the accounts.
FRS 102 removes some of FRS 19’s exemptions from recognising deferred tax. As a result, in contrast to current UK GAAP (that is, FRS 19), companies will often need to recognise significant deferred tax liabilities on revaluation gains.
The tax won’t be payable until the gain is realised.
Many property investors are likely to switch to Micro-entity accounting because its much simpler and doesn’t require property revaluations and deferred tax.
Business Accountant 