Quizzes & Puzzles0 min ago
Club Balance Sheet
A not-for-profit club owns a building on land that is also owned by the club via property company. The shares of the property company are held in trust by trustees who are members of the club.
In the annual balance sheet for the club the building is shown as a fixed asset and a value is set against it. Looking back over the balance sheets for the last 6 years the value shown has never changed. what are the implications/are there any implications in the figure remaining static?
In addition to this, is there any relationship between the value of the asset shown in the balance sheet and the figure that the building is insured for?
In the annual balance sheet for the club the building is shown as a fixed asset and a value is set against it. Looking back over the balance sheets for the last 6 years the value shown has never changed. what are the implications/are there any implications in the figure remaining static?
In addition to this, is there any relationship between the value of the asset shown in the balance sheet and the figure that the building is insured for?
Answers
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The implications are that the total assets shown on the balance sheet may not reflect the true situation. The trustees should consider revaluing land values from time to time and seek professional view, if appropriate. There is no automatic link between the value of a property and its insurance value for rebuilding purposes. Many people seem to think they...
07:53 Thu 14th Aug 2014
The implications are that the total assets shown on the balance sheet may not reflect the true situation. The trustees should consider revaluing land values from time to time and seek professional view, if appropriate.
There is no automatic link between the value of a property and its insurance value for rebuilding purposes. Many people seem to think they they should insure a property for its market value; this is nonsense. Rebuilding cost reflects demolition following a buildings total destruction in a fire, say, then reconstruction. In parts of the country where market valuations are high, the rebuilding cost will be far less. The difference is the value of the land, which cannot be destroyed.
There is no automatic link between the value of a property and its insurance value for rebuilding purposes. Many people seem to think they they should insure a property for its market value; this is nonsense. Rebuilding cost reflects demolition following a buildings total destruction in a fire, say, then reconstruction. In parts of the country where market valuations are high, the rebuilding cost will be far less. The difference is the value of the land, which cannot be destroyed.
More on the same balance sheet.
What would be the correct way of removing a loan from the clubs balance sheet. There are no records of such a transaction, no one can recall to whom the loan was made and has to all intents and purposes it was never repaid and is never likely to be? The loan was made by the club over 30 years ago.
What would be the correct way of removing a loan from the clubs balance sheet. There are no records of such a transaction, no one can recall to whom the loan was made and has to all intents and purposes it was never repaid and is never likely to be? The loan was made by the club over 30 years ago.
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