Investment Property under FRS 105

Investment Property under FRS 105

What’s the difference in treatment of investment property between FRS 105 and FRS 102?

Too many accountants rely on the computer software to produce the correct result, which can go badly wrong.  You can’t beat reading the standards themselves. In this case, the March 2018 version (as amended) of FRS 105 and more particularly Section 12 of FRS 105 which deals with Property, plant and equipment and Investment Property.

Investment property assets are normally carried at revaluation under Irish GAAP i.e. FRS 102, but it’s dangerous to assume that FRS 105 allows the same treatment. For the purposes of this blog, I am ignoring the FRS 102 options for investment property, which allow for cost/fair value models, in certain circumstances. Instead I want to focus on the fact that FRS 105 removes most FRS 102 options.

Where the company owning the property is a ‘micro-entity’ (as defined in the Companies Act, 2014 with turnover €700k, gross assets €350k, and less than 10 employees), it is not allowed apply the alternative accounting rules/fair value accounting rules under FRS 105, because the Companies Act, 2014 does not permit the use of these options.

Therefore, investment property must be carried at cost under FRS 105.12.3 and the knock-on effect of this is that the investment property must also be depreciated under FRS 105.12.15 because that is a requirement of the cost model.

The bottom line is that if you have ‘small’ (as defined in the Companies Act, 2014) company clients who wish to report investment property assets at revaluation or at fair value, then they must adopt FRS 102 Section 1A (as amended) or else the full version of FRS 102 (March 2018) (as amended).

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FRC Rent Concession May Impact Financial Reporting

FRC Rent Concession May Impact Financial Reporting

In response to the continuing impact of Covid 19 the Financial Reporting Council (FRC) has extended the accounting requirements for special conditions for reporting rent and lease concessions/reductions under FRS 102 and 105 well into next year. The change will enable businesses to present a clearer picture of their performance in year-end accounts.

Many entities have struggled to pay rent and meet lease payment commitments for their rental properties. This has led to negotiations between tenants and landlords in the form of rent concessions (deductions in rent or waivers) or rent deferrals (an agreement to pay rent or lease payments until a later date).

According to the FRC, the prolonged duration of the pandemic has made it necessary to extend the existing reporting time for a further 12 months to 30 June 2022 to help ensure consistency and accuracy in financial reporting and in such a way that best reflects their substance.  The disclosure of the reality of rent concessions for businesses, will achieve a true and fair presentation by recognising the reduction in full for the period concerned.

The concession means that if a business doesn’t have to pay rent for a given month, no expense will be recognised for that month. Prior to the advent of Covid-19, a rent reduction would have been recognised over the life of the lease.

The main conditions of the proposals contained in FRED 78 are:

  • Entities must recognise changes that reduce lease payments in the period to 30 June 2022, and meet the other specified conditions, on a systematic basis over the periods that the change is intended to compensate, rather than spreading the impact of the change, over future lease periods.
  • The amendments are effective for accounting periods beginning on or after 1 January 2021, with earlier application permitted.

The net impact will be that if the business doesn’t have to pay rent for a given month, no expense will be recognised for that month thus allowing companies to report a more accurate picture of their cash management, performance, and rent-related support measures, reflecting the businesses’ economic reality.

There are rumours that the FRC may seek to extend the reporting period again, at least until the end of the pandemic, especially if there are further lockdowns, during winter, potentially leaving the retail sector in the same position as before.

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In excess of 100 companies registered at Dublin family home

In excess of 100 companies registered at Dublin family home

A recent article by the Independent revealed that a Rathfarnham family home address had been used in the registration of over 100 companies. See the full article here.

The article reports that two tenants resident at the address, had use the owner’s address without his knowledge.  This highlights a major weakness in the CRO’s procedures for company set up where the trust placed in the ‘self-declaration’ process has been found wanting.

The Office of the Director of Corporate Enforcement (ODCE) and An Garda Siochana were contacted by the homeowner.

A spokesperson for the Department of Enterprise Trade and Employment which oversees the CRO confirmed that the CRO does not verify the identities of directors or secretaries of companies.

This latest development calls into question the serious lack of background verification carried out by the CRO which ensures that the Office never calls into question instances where multiple addresses are listed for the same director, not to mention the increased risk that these businesses could be used for money laundering activity.

A similar problem exists at UK Companies House where a consultation has been carried out called the ‘Corporate transparency and register reform’. Proposals include making companies using the FRS 105/102 accounts frameworks in the UK, declare their turnover, among other recommendations, to help verify that they genuinely qualify for these much reduced disclosure regimes. The results of the consultation have not yet been announced, but similar moves be follow in Ireland.


For more about accountants’ AML compliance obligations, see our AML Policies, Controls & Procedures Manual for 2021.


The Manual contains all the latest requirements relevant to accountants contained in the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021 now fully in force.  Future blogs will look at various parts of the new and existing provisions of this legislation.


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New Procedures Manual to help with AML

New Procedures Manual to help with AML

We have just published an update to the AML Policies Controls & Procedures Manual last week, which is available to purchase now on our website. Our latest February 2020 edition includes the following updated items:

  1. Pronouncement by the FATF arising from their Public Consultation on FATF Draft Guidance on Digital Identity (discussed at the FATF plenary meeting in Paris from 19-21 February 2020)
  2. The latest developments on the RBO register since June 2019
  3. Further guidance on carrying out electronic searches and the validity of sourcing electronic data for client identity purposes.

This Manual contains everything you need to successfully implement the requirements of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018 which became law on 26 November 2018 and the Register of Beneficial Ownership which came into effect on 22 June 2019.

This Manual comes with a, free of charge, Excel spreadsheet called the ‘AML Control Sheet’ which firms may use to give a ‘helicopter’ view of progress made with keeping client AML data up to date.

The Manual includes eleven Appendices with templates/guidance on how to implement the legislation efficiently. It retails for only €150+VAT and may be downloaded, ready to use, in Word format.

How to deal ethically with conflicts of interest

How to deal ethically with conflicts of interest

As we highlighted last week there is a newly revised and restructured Code of Ethics coming soon for accountants in Ireland, expected to be effective from the 1st of March 2020.

Sometimes accountants realise they have a conflict of interest due to lack of foresight or pre-planning. An example could be trying to sort out a dispute between two clients of the same accountant. The new Code seeks to address this with more guidance.

Conflicts of Interest

The sections on conflicts of interest in the new code have been completely replaced and split into two sections, 210 and 310, covering ‘business’ and ‘public practice’ respectively.

These sections have been revised and the guidance on ‘how to apply the conflicts of interest requirements’ has been enhanced.

The new section maintains the requirement for all parties to be notified of the conflict and obtain their explicit written consent, but also:

  • Gives examples of the types of conflict of interest;
  • Makes explicit reference to the ‘RITP’ test – the Reasonable and Informed Third Party test (which was only hinted at in the past). The definition of ‘RIPT’:
    • The reasonable and informed third party is someone ‘who weighs all the relevant facts and circumstances that the accountant knows, or could reasonably be expected to know, at the time the conclusions are made. The reasonable and informed third party does not need to be an accountant, but would possess the relevant knowledge and experience to understand and evaluate the appropriateness of the accountant’s conclusions in an impartial manner.’ – (from 120.5 A4 in the proposed new Code of Ethics)
  • Sections 210/310 also provide additional discussion of matters such as conflict identification processes, safeguards, types of disclosure and consent, and when work can be taken on without disclosure and consent.

A helpful flowchart to aid the decision-making process regarding conflicts of interest is available at this link (courtesy of the ICAEW helpsheet from December 2019).

Watch our website for the forthcoming webinar on the new rules.

See our latest additions to the website store which are the AML Business-Wide Risk Assessment Word template and a webinar on how to prepare it. Both of these help firms comply with the latest requirements of Section 30A of the Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2018, effective from 26 November 2018.

For other webinar topics including Investment Property Accounting, FRS 105, Common Errors in FRS 102 Accounting and the latest on FRS 105 and company law, visit our online webinar training website.

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