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. The estimated useful economic life for each component is as
follows:
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. Freehold land is not depreciated.
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.
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.
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 2018 was £81.8m.
Building 125 years
Kitchen 20 years
Bathroom 30 years
Boiler & central heating 20 years
Windows and doors 35 years
Lifts 30 years
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. Further details are set out in note 13.
Capitalisation of interest costs
Interest on borrowings is charged to housing properties under
construction up to the date of completion of each scheme.
The interest charged is either on borrowing specifically for a
scheme or net borrowings, to the extent that they are deemed
to be financing a scheme based on the weighted average cost
of capital. This treatment applies irrespective of the original
purpose for which the loan was raised. Further details are set
out in note 5.
Other interest payable is charged to income and expenditure in
the year.
Financial Statements 2018
43