Accounting (FRS 102)

What is FRS 102 Section 16?

FRS 102 is the principal accounting standard under UK Generally Accepted Accounting Practice (UK GAAP), and Section 16 is the part that deals with investment property — property held by a company, freeholder or leaseholder to earn rental income or for capital appreciation. Its central requirement is simple to state and demanding to comply with: investment property must be carried at fair value at each reporting date, and that figure needs credible valuation evidence behind it.

What counts as investment property?

Not every property a business owns is investment property. Premises used to produce goods or services, or occupied for administrative work, are owner-occupied — they sit in the accounts as ordinary fixed assets rather than under Section 16, and the accounting (and tax) consequences differ accordingly. Mixed situations are common: a building part-let and part-occupied, or a property let to another company in the same group. Your valuer will provide the fair value evidence for whichever parts qualify as investment property, while the classification itself is agreed with your accountant — the two questions work together, and the treatment can change how much tax becomes payable and when.

Fair value at each reporting date

Investment properties are initially recognised at cost, but must then be revalued to fair value at each balance sheet date, with the movements recognised in the profit and loss account — so the valuation is not a one-off exercise but an annual discipline, and year-on-year consistency of method matters. Occasionally a property cannot be valued reliably without undue cost or effort; it is then treated as a normal fixed asset, carried at cost and depreciated over time. That is the exception, though — for most let property, a market-evidence fair value is achievable and expected.

Disclosures and deferred tax

The accounting entries bring disclosure obligations with them. Deferred tax on uplifts in the property's carrying value must be presented in full, and the accounts must disclose the methods and significant assumptions applied in reaching fair value — including whether the valuation was carried out by an independent valuer holding a recognised professional qualification, which is precisely where an RICS Registered Valuer's report earns its place in the file. Any contracts entered into for the purchase, development or maintenance of the property also require disclosure.

Why instruct an RICS Registered Valuer?

Auditors test fair values, and a directors' estimate with no evidence behind it invites qualification and delay. A Red Book valuation from a Registered Valuer on the panel gives the accounts a figure with documented comparable evidence, stated assumptions and professional liability attached — the same report standard used for the panel's wider RICS valuation services and commercial property valuations. For portfolios, the valuations can be co-ordinated across properties and repeated consistently at each reporting date, which is what keeps the P&L movements meaningful rather than noisy. Read more about the standard behind the report in our Red Book valuation guide.

Fees and timescales

FRS 102 valuation fees are quoted individually — per property or per portfolio — and fixed before instruction, with the work scheduled against your reporting date so the figures land when the accountants need them. Contact our team to organise an RICS Registered Valuer who can assist with FRS 102 fair value reporting.