You will notice this year that there has been a revaluation of investments. This is merely a change to presentation of the accounts only – there is no additional physical charges or receipts due to the society as a result of this format change.

VALUATION OF INVESTMENTS

Under the new FS102 section 1A accounting standards, all investments in shareholdings are required to be displayed at their current market value, with any movement in that valuation being allocated to the Fair Value reserve.  A forecasted tax charge is also calculated and subsequently deferred to the same reserve.  The idea behind this revaluation strategy is the balance sheet of the entity holding the investment then has a more accurate balance sheet showing the ‘true’ financial position of the undertaking, allowing better strategy decisions to be made and, essentially, the accounts becoming more useful to the end user.

In the case of the Society accounts this year, this has resulted in the following changes:

Income Statement

• In the income statement, there is a new line labelled “Gain / Loss on revaluation of investments”.  Because the investments have never been revalued and were purchased prior to 1997, the revaluation amount is substantial, being calculated at £76,799 for the financial year 2022.  Subsequent revaluations in future years will be much more minor, it is literally because there has been no movement in over 25 years that this figure is quite so large.

• Also in the income statement is a taxation charge of £14,298 – this is the forecasted amount of tax that would crystalise if, and only if, the investments were sold at their current market rate.  To be very clear, there is no physical taxation payment due this year on the figures presented.   

• The net position is that a surplus of £61,454 has been recorded for the year, rather than the loss the society was previously expecting, but only as a result of the presentational changes listed above.

Balance Sheet

• On the balance sheet, investments have been revalued to a figure of £78,731 from £1,932 in 2021.

• Also on the balance sheet is a new line labelled “Provisions for liabilities” – this is the deferred tax charge on the potential sale of the investments.

• Further, on the balance sheet, there is a new reserve labelled the “Fair Value Reserve” which shows the net revalued amount.  This keeps the revaluations separate from the Retained Income of the Society, which is shown in a separate reserve.  

• The net position is the balance sheet now has net assets of £83,760 

Statement of Changes in Equity

• Finally, there is a new page labelled “Statement of changes in Equity”, included to show the transfers of the revalued amounts from the Income Statement to the Fair Value Reserve.

 Please see below the 2022 British Palomino Society Accounts: