An update to FRS 102 was finalised in December 2017 and will be mandatory for accounting periods commencing on or after 1 January 2019.

Early adoption will be permitted provided all amendments from the review are adopted at the same time. The Charity Commission have issued a draft SORP update bulletin 2 at present and propose to fully update the SORP in due course.

The update will remove the undue cost exemption currently available for investment properties which allows for the previous carrying value of an investment property to be taken as deemed cost if it is not possible to obtain the fair value of the property without undue cost or effort. This exemption has been used significantly by the Charity sector to avoid expensive revaluation exercises.

Removal of the exemption means that Charities will have to value their investment properties, including mixed used properties i.e. properties partly used by the charity and partly let out to generate income.

Where the investment property is being let to a third party to generate income for the charity, the loss of the exemption will require the fair value of the investment property to be determined and adjusted for in the charity’s financial statements at the end of each reporting date.

Group companies (trading subsidiaries)

Where the exemption is used for properties being let between group entities, the loss of the exemption is not likely to have an impact due to another amendment in the FRS 102 update. There will no longer be a specific need for a property let within a group to be accounted for as an investment property. Instead this will be an accounting policy choice going forward, i.e. cost basis may be used.


The obvious option is to have the property valued by a qualified individual however this is likely to result in an additional cost to the charity.

An alternative option, allowed by the SORP, enables the Trustees to calculate a reasonable valuation which can be used. This could negate the need for a professional valuation. Each case would need to be separately reviewed, however, the following are suggested resources which may help trustees to calculate an appropriate value:

  • Insurance value(s);
  • Previous historic valuation(s)
  • Return on investment (yields)
  • Current and historical prices in the local area
  • Price changes in the local area since last formal valuation

If your charity has investment property and you would like to seek further advice please contact your local Bishop Fleming charity expert.


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