Teifi Valley Railway

I know of 1 shareholder who received no accounts for a number of years. Requests produced nothing so that one gave up to avoid the hassle and stress.

 

They do know, because the same thing happened last summer. Also the Cardigan accountant who has helped put the Accounts together since 2015 has sent them frequent reminders and is also pointing out that his fees are overdue.

 

The assets consist of the land - about 5 miles of trackbed, most of it undeveloped - and buildings - carriage shed, cafe, toilets and stores. These are all subject of a charge by the Bank, which is a condition of the overdraft facility. The land has some additional value at the moment, as it is specified in the Light Railway Order of 1980, but if the Company is struck off the LRO dies with it. The rolling stock is owned by the Railway Society, who will presumably have to take it away when the Company closes.
Quite incredible that the same mistake could be made twice.

 

If one happens to be speaking of the congenitally stubborn, no .... not particularly.

 

The accountant's reminder last week appears to have done the trick - the Accounts for 2020 reached Companies House today!

 

Good news .... and Bob knows, good news has been thin on the ground for the past couple of weeks. Might we hope a corner has been turned .... and stays turned!

I'm sure if this 'ere thread can safely return to an emphasis on the fine work of the dedicated TVR volunteers, no-one will be happier than @Elizabeth Perry.

 

Question for the accountants out there...
Is it normal to apply annual depreciation to the cost (value?) of the freehold property?
Just asking.

 

A key principle of accounting is prudence hence industrial property, where buildings often have limited lives and high repair costs, will often be depreciated (often explained in the notes by comments such as depreciated over useful or remaining life) whilst the freehold land on which they sit may need separate valuation. Any presumption that freehold property only rises in value may be entirely wrong particularly for "brownfield" sites where previous use may mean significant remediation costs when a previous use ceases. E.g. clearance of encapsulated asbestos, chemically polluted ground etc. etc.

Ultimately property valuation is more art than science and hopefully the notes to the accounts will provide information about assumptions and policies such that readers can form their own view of the situation and how realistic various charges (depreciation, contingencies etc.) are.

 

Actually Prudence if not actually dead is not a major player in the principles of accounting these days. International accounting standards have pretty much sent her into retirement.

 

Thanks for the answers. Unfortunately looking at the accounts again to see what the notes say and the figures they have used I'm now really confused.
In the notes to the accounts:-
"2. ...
Tangible fixed assets
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Land and buildings - 2% on cost..."
Buildings I understand but a fixed charge on land ? I understood that the only way to vary the value of land was to have a formal valuation, otherwise, as you said, you don't know if it's going up or down.

and then in note 4 Tangible fixed assets, Freehold property:-
"Cost at 1 January 2020 and 31 December 2020 = £457,850
Depreciation as at 1 January 2020 £348,662
Charge for year £ 11,556 (my highlight)
As at 31 December 2020 £ 360,218"
To me -2% on Cost (of £457,850) should be £9,157 and not the £11,556 stated...
Where am I going wrong?

 

At first glance the figures do not look correct. Freehold land would not normally be depreciated, the only exception would be where the cost of the land was not material in relation to the total of land and property.

 

I am a retired Chartered Surveyor, with considerable experience in asset valuations, particularly for the NHS. As others have pointed out, land and buildings should be separately stated, with the buildings depreciated over their economic life and the land at market value. Questions here - is the land freehold or leasehold to the Company? If the latter, the value will be affected by the remaining life of the lease. Secondly, what market would there be for the land? What potential alternative uses does it have? Is there any residential or agricultural potential? If there is no ready market, the land may not have a great deal of value.

 

I believe that the railway did, originally, own the land from (and including the station site at Llandysul) as far as Newcastle Emlyn (I've no idea about the station site there). The Llandysul station site and some of the trackbed was sold off for the Llandysul bypass road (c2005?).

There was some talk about 2000 about the land being sold off for housing. EDIT: the Henllan station site being sold off for housing.

 

Yes, the original station site. It is a lot bigger.

 

Up to 2002, the accounts stated that depreciation on freehold buildings was over an expected useful life of 40 years, which equates to a rate of 2.5%. In that year the 2.5% rate was applied to the whole of the cost of what was described as "Freehold land and buildings" in the tangible fixed assets note to the accounts (£9,679 on a cost of £387,166).

As far as I can see the 2.5% rate is still being used today on the whole cost of both the "Freehold Property" and "Improvements to property" categories in the tangible fixed assets note to the accounts.

I can offer no opinion on why there is no split between the land and buildings elements of the freehold property unless the land element is not material as you say, or why the accounting policy states 2% rather than 2.5%. However the actual accounting treatment appears not to have changed for more than 20 years.

 

For those with unanswered questions : the TVR Facebook page announces that there will be a Society AGM in the next 2 months. Join up today!

 

Thanks for all the answers folks, it seems like the more answers you get the more questions are found. It's not as simple as I thought . Oh well.
Well done @Elizabeth Perry for not missing a trick in drumming up support for the railway but, as I'm now over 280 miles from Henllan it's a bit far for a day trip! I wonder if they'd answer a written question... ? (Three hopes? or a snowballs...?)

 

As Robin says, the same system of depreciation was used for over 20 years, with an increase in value every time there was a track extension or a new visitor facility. The accountants at the time explained that the new item increased the opportunity for a greater profit to be made. It also meant that it increased the market value of the business. The events of 2014 - lifting the track, ruining the trackbed, felling all the trees - obviously reduced the value of everything, but this was not reflected by the Accounts then or since.
The original purchase of the trackbed was just that - trackbed, with the exception of Henllan station and goods yard. BR refused to sell the station areas at Newcastle Emlyn and Llandysul. This was especially frustrating at Llandysul. where there were only a few feet between the platform and the road. Eventually the platform area went under the Bypass. We did salvage a quantity of diamond cut platform tiles first...

 

The AGM of the Teifi Valley Railway Society will be held on Saturday May 14th at 2pm. The notification points out that only Society members can attend. Will be held in the cafe at Henllan.