For solar and other renewable energy businesses, investment in fixed assets accounts for a significant part of the expenditure, for example, solar panels in the case of solar energy.
Before 1/6 April 2012 solar panels including photovoltaic varieties, which generate electricity, and solar thermal systems, which provide hot water, were generally treated as special rate on the basis that they were integral features of buildings or structures CA 22300 or long life assets CA23700.
Each of the following is an integral feature of a building or structure: external solar shading. Only assets that are on the list are integral features for PMA purposes; if an asset is not one of those included in the list, the integral features rules are not in point.
Ordinarily the cost of an item of fixed asset is the cash price equivalent at the date of recognition and this will usually be found on the supplier’s invoice. If, however, payment is deferred beyond normal credit terms, then the cost price is the present value of all future payments.
Power generating equipment is a fixed asset and is principally valued at cost. However, impairment accounting is required in certain cases.
Examples frequently cited include the linings of blast furnaces and the engines of aircraft. When the major components of a fixed asset have significantly shorter lives than the main asset itself, FRS 102 would require the entity to depreciate each such component separately over its useful life. Fixed assets are always initially recognised at cost.