We have some very old assets over 150 years. We do not know the original cost only a valuation estimate for insurance purposes.
How should these be represented on the balance sheet in Manager. There will be no depreciation cost as they would be fully depreciated and zero cost but still have a value.
Does this have to be an intangible asset?
Thanks for all the feedback nearly there with a professional accounting system.
The answer has nothing to do with Manager. It depends on the reporting practices and legal requirements in your jurisdiction:
Regardless, you need local accounting advice to know the proper course of action. But a fixed asset (land, building, furniture, equipment) will never be an intangible asset. Intangible assets include things like patents, good will, customer lists, proprietary processes, etc., that have value but are not physical (other than perhaps a minimal value for the paper they are recorded on).
If you intention is to have them represented on the Balance Sheet so that there is a ownership register of these financial items (albeit being of zero accounting value), then yes you could create that register under Fixed Assets.
They need to be on the balance sheet to record their ownership.
These items are of antique value and unique. Their valuation is a variable since it can only be determined accurately if we were to sell them or by comparison to similar items available in the market place.
We insure these items for what we consider their minimum replacement values. I think this is what should be shown on the balance sheet. I have found that I can assign a zero cost and negative depreciation but not sure how to represent the value on the BS.
What would you suggest.
That is not a valid reason for having them on the balance sheet. Accounting records do not validate or record ownership.
This is a consideration only if, in your jurisdiction, you are required to carry assets at a book value commensurate with their market value. Again, a local accountant can advise you.
Again, replacement (market) value is only relevant if you are required to value the assets at market value.
Don’t even think about negative depreciation entries. That would misrepresent your financial performance. If necessary, adjustments to value should be made through journal entries.
I already did. Consult a local accountant. Don’t look for advice related to tax and reporting requirements on this forum.
You definitely need advice to your specific accounting principles to be sure whether you should recognize the items (and their valuation, if so) or not.
Ignore them. Don’t let them show in the BS. Just because you are paying insurance on them doesn’t mean you have to value them and show them.
It is clear you are using the cost model of carrying fixed asset where asset are depreciated over their useful life. Unlike fair valuing models (fair value and Revaluation model) that requires periodic adjustment of the value of the asset to fair value with gains and losses treated as some income/loss.
So in the books the asset has been consumed but in reality they exist but your accounting policy won’t allow for Revaluation.
No, insured value has nothing to do with balance sheet value
Lets say you buy real estate (building & land) for 600,000 - that is the balance sheet value.
The building on the land costs 400,000 to rebuild if destroyed - that is the insured value.
Others have referred to jurisdiction legal requirements which are a factor if you are required to submit formal documentation to an authority but as you are a club, am assuming non-profit at that, you may not have those obligations (except to members) therefore possibly you aren’t restricted by those legal limitations, but even if you are, this doesn’t prevent the club from adopting its own internal management policies.
For example, multinational companies adopt internal management policies so that all their various country operations talk the same reporting language when communicating with head office, however for local authority reporting they make adjustments within the formal documentation to eliminate any legal requirement conflicts.
Therefore your club management (not solely the bookkeeper) could resolve to adopt an internal policy which brings these fixed assets to account within the Balance Sheet at market value.
But first, you stated that “We have some very old assets over 150 years” which implies that at some past point they (unless they were donated) could have been listed as assets of the club but due to 1) them being fully depreciated and/or 2) they weren’t deem to be of material value and/or 3) as the club account’s recording system changed - they were dropped from being recorded. The point here being, that once an asset has been recorded in the club accounts then it remains a recorded asset (albeit being of zero accounting value) until it is disposed of.
Therefore, I don’t support the notion “ignore them” just because they have “fallen” off the balance sheet over time. In fact I would go as far as saying that by not having them listed in the balance sheet (albeit being of zero accounting value) then the accounts are not of “full disclosure” as there exists assets off the balance sheet not being reported. Besides, having them listed in the balance sheet supports the club’s ownership - which maybe beneficial for any potential insurance claim.
Now getting back to the present, if the club’s management resolves to carry these assets in the balance sheet at market value (which may or may not be the insured value) then the accounting Journal entry would be:
With the Asset Revaluation account being listed under the Balance Sheet Equity section.
The management’s resolution may also cover 1) if these revaluations should be depreciated or not and at what rate* - 1% pa and 2) in what time frame will they re-valued again - 5 years.
*If the expectation is that they will continue to appreciate in value then perhaps no depreciation.
If you do have formal reporting requirements (besides members) and the above internal policy is in conflict, then at each year end - back up the accounts and then import as a separate business and delete the revaluation journal (plus any depreciation if applicable) and you will have the accounts that match the legal requirements for your jurisdiction.
We are a not for profit members club with no formal tax or public reporting requirement. All our income other than General reserves are given to charity.
You last approach seems to meet my requirements for formally recording these items in our accounts. They have previously been recorded on paper by the secretary. Some of our assets will need money spending on them for repair, e.g. Rebinding an old bible. These will be charged to funds I have set aside for this purpose
Some of our previous assets have been lost. Usually having been held by a member who has died and sold as part of their estate. If we ever see things relating to our historic activities we will purchase them as a new asset.
I now have a structure in place that I can talk to an accountant about for verification in the UK.
I hope then to recommend Manager software to other Lodges. I think it is very good that Manager is freely available to groups like ours and would willingly make a donation for its ongoing development and support for other users.
Once again many thanks for your advice. The more we pay accountants the less we give to charity and we only need simple solutions for simple cash flows.
