Fair value

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Fair value

Once capitalised, tangible non-current assets can be held at cost, less accumulated depreciation, or at their fair value (i.e. revalued amount).Holding assets at their fair value is subject to certain conditions beingmet. These include: Where revaluation (fair value) method is chosen all assets withinthe same class of property, plant and equipment must be revalued. Assets held at fair value must be reviewed regularly to ensure thattheir carrying amount (fair value less any subsequent accumulateddepreciation) equates to their current fair value. Where the current fair value of an asset is less than its carryingamount then the asset is regarded as being impaired and theresulting impairment loss should be charged to the Statement ofProfit or Loss and Comprehensive Income. Property, plant andequipment are usually reviewed annually for impairment.IAS16 states that the basis of the valuation for non-specialised propertiesshould be market-based evidence which is the subject of appraisalnormally undertaken by professionally qualified valuers.Assets held at fair value must be regularly reviewed to ensure that theircarrying amount is up to date. IAS 16 does not specify the regularity ofsuch valuation assessments but states that they should be carried outwith sufficient regularity to ensure that the carrying amount of the assetis not materially different to its actual fair value at the end of theaccounting period. Thus, management need to decide how oftenvaluations should be carried out. Some assets may need to be valuedevery year because of their nature, while others may need revaluing sayevery three or five years.