Contributions payable by the association to SHPS under the terms
of its funding agreement for past service deficits are recognised
as a liability within other provisions in the association’s financial
statements, in accordance with the requirements of FRS102.
Sale of housing properties
Where properties built for sale are disposed of during the year, the
disposal proceeds are included in turnover, and the attributable
costs included in cost of sales. The surplus or deficit on disposal
of housing properties held as fixed assets, including second
or subsequent tranches of shared ownership properties, is
accounted for in the statement of comprehensive income. Where
any Social Housing Grant (SHG) is to be recycled or repaid is less
than the SHG relating to the disposal, the difference is treated
as abated SHG and included as a component of the surplus or
deficit on disposal.
Housing properties, impairment and property
improvements
Housing properties are properties held for the provision of social
housing or to otherwise provide social benefit. Housing properties
are principally properties available for rent and are stated at cost
less accumulated depreciation and impairment losses. The cost of
such properties include:
n Costs of acquisition, including stamp duty
n Construction costs
n Cost of capital employed during the development period
n Directly attributable administration costs
Directly attributable administration costs are the labour costs
arising from acquisition or construction, and the incremental costs
which would have been avoided only if the property had not been
constructed or acquired.
Works to existing properties which replace a component that has
been treated separately for depreciation purposes, along with
those works that result in an increase in net rental income over the
lives of the properties, thereby enhancing the economic benefits of
the assets, are capitalised as improvements.
Management reviews its estimate of the useful lives of depreciable
assets at each reporting date based on the expected utility of
the assets. Uncertainties in these estimates relate to changes
to decent homes standards which may require more frequent
replacement of key components. Accumulated depreciation as at
31 March 2015 was £4.0m.
The estimated useful economic life for each component is as
follows:
n Building: 125 years
n Kitchen: 20 years
n Bathroom: 30 years
n Boiler & central heating: 20 years
n Windows and doors: 35 years
n Lifts (where applicable): 30 years
Freehold land is not depreciated. Leasehold properties are
amortised over the life of the lease or the useful economic life,
whichever is the shorter.
The association reviews its properties for indicators of impairment
on an annual basis. Where such indicators are identified, an
assessment for impairment is undertaken comparing the schemes
carrying value to its recoverable amount. Where the carrying value
is deemed to exceed the recoverable amount, the scheme is
written down to its recoverable amount. The resulting impairment
loss is recognised as operating expenditure.
Properties for sale
Expenditure on shared ownership properties is split
proportionally between current and fixed assets based on
the element relating to first tranche sales. The first tranche
proportion is classed as a current asset and related sales
proceeds are included in turnover, and the remaining element is
classed as a fixed asset and is included in housing properties at
cost, less any provision of depreciation or impairment.
The association separately identifies the major components which
comprise its housing properties, and charges depreciation, so as
to write-down the cost of each component on a straight line basis
over its useful economic life.
Financial Statements 2016
75