The fixed asset note shows, for each class of fixed assets, cost (or valuation) at the start of the year, the movements during the year and cost at the end, then the same for accumulated depreciation and impairment, leaving net book value at both dates. Company law requires it for small as well as larger companies, FRS 102 adds a full carrying amount reconciliation, and neither requires the reconciliation for the prior year.

Where does the requirement come from?

There are two overlapping sources.

  • Company law. Paragraph 48 of Schedule 1 to the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 (SI 2008/409), and paragraph 51 of Schedule 1 to SI 2008/410 for medium and large companies, require information for each item shown under fixed assets in the balance sheet. The two paragraphs are worded the same.
  • FRS 102. Paragraph 17.31 requires, for each class of property, plant and equipment, the gross carrying amount and accumulated depreciation at the start and end of the period, and a reconciliation of the carrying amount showing additions, disposals, acquisitions through business combinations, revaluations, transfers to or from investment property, impairment losses and reversals, depreciation and other changes. Similar requirements apply to intangible assets, goodwill and investment property in their own sections.

A small entity applying Section 1A meets the company law requirement through paragraphs 1AC.12 and 1AC.13 of Appendix C, which restate paragraph 48.

What exactly must the note show?

For each item, paragraph 48 (or 51) requires:

  1. The aggregate cost or valuation at the start of the year and at the balance sheet date, ignoring depreciation.
  2. The effect during the year of revaluations, acquisitions, disposals and transfers to and from that item.
  3. The cumulative provisions for depreciation or diminution in value at the start and end of the year.
  4. The provisions made for the year, the adjustments to provisions on disposals, and any other adjustments.

An “item” is a class of fixed asset shown separately on the face of the balance sheet or in the notes. The guidance in Appendix C to Section 1A says the requirement covers all fixed assets: investment property, property plant and equipment, intangible assets including goodwill, right of use assets, fixed asset investments, biological assets and heritage assets.

How does the reconciliation work in practice?

The note is built as two running totals that meet at net book value.

Illustration only. Plant and machinery for the year ended 31 March 2027:

Cost £
At 1 April 2026 200,000
Additions 50,000
Disposals (30,000)
At 31 March 2027 220,000
Depreciation £
At 1 April 2026 80,000
Charge for the year 44,000
Eliminated on disposals (24,000)
At 31 March 2027 100,000
Net book value £
At 31 March 2027 120,000
At 31 March 2026 120,000

The disposed asset had cost £30,000 and accumulated depreciation of £24,000, so its carrying amount was £6,000. Whatever the sale proceeds, the profit or loss on disposal goes through the profit and loss account; it does not appear in this note. How that figure is worked out is covered in accounting for disposals of fixed assets.

In a real note each class sits in its own column (for example freehold property, plant and machinery, fixtures and fittings, motor vehicles) with a total column, and the closing figures agree to the balance sheet.

Is a comparative reconciliation required?

No. FRS 102 paragraph 3.14 normally requires comparative information for all amounts presented, but paragraph 3.14A says an entity providing reconciliations of fixed assets under paragraph 51 of Schedule 1 to the Regulations need not present them for prior periods. Paragraph 17.31(e) repeats the point for property, plant and equipment, and the Appendix C guidance says the same for small entities. The prior year net book value still appears, as the opening figure and on the balance sheet.

What else is disclosed alongside the numbers?

  • Policies. FRS 102 paragraph 17.31 requires the measurement bases, depreciation methods and useful lives or rates for each class. Paragraph 1AC.3 requires a small entity to state its accounting policies, including depreciation and impairment. See depreciation methods.
  • Security and commitments. Paragraph 17.32 requires the existence and carrying amounts of assets with restricted title or pledged as security, and the amount of contractual commitments to acquire property, plant and equipment.
  • Revaluations. Where assets are carried at revalued amounts, paragraph 17.32A requires the effective date of the revaluation, whether an independent valuer was involved, the methods and significant assumptions, and the carrying amount under the cost model. See revaluation of fixed assets.
  • Impairment. Impairment losses and reversals are part of the reconciliation under paragraph 17.31(e)(vi); the measurement rules are in impairment of assets under FRS 102.

Do micro entities need a fixed asset note?

No. Regulation 5A of SI 2008/409 says that nothing in the Schedules requires a micro entity’s accounts to contain notes, except the information under paragraph 57 of Part 3 of Schedule 1 on guarantees and financial commitments, and section 472(1A) of the Companies Act 2006 requires the notes that are needed to be given at the foot of the balance sheet. A micro entity still needs records of its assets to produce the balance sheet figure, but it does not publish the reconciliation.

How does the note connect to the asset register and the tax computation?

The note is a summary of the fixed asset register. Additions in the note should match capital purchases in the register, and disposals should match assets removed, at their original cost. If the register and the nominal ledger disagree, the difference usually shows up as an unexplained “other adjustment” in the note, which is a sign that something has gone wrong.

The tax computation runs alongside but separately. HMRC’s Capital Allowances Manual at CA20006 states that depreciation charged in the accounts is not allowed as a deduction in computing taxable profits, and that capital allowances may be given instead. The additions line is therefore a useful starting point for a capital allowances claim, but the qualifying expenditure has to be identified asset by asset.

What mistakes come up most often?

  • Disposals at net book value. Removing only the carrying amount from cost leaves the depreciation on the sold asset stuck in accumulated depreciation, so both columns are overstated.
  • Fully depreciated assets left in forever. Assets that have been scrapped should be removed from both cost and depreciation; leaving them in overstates gross figures even though net book value is unaffected.
  • Classes that do not match the balance sheet. If the balance sheet shows tangible and intangible assets separately, each needs its own reconciliation.
  • Revaluations netted with additions. Company law asks for the effect of revaluations, acquisitions, disposals and transfers separately.
  • Totals that do not cast. Closing cost less closing depreciation must equal the balance sheet figure for each class, and the depreciation charge must agree to the amount in the profit and loss account and any note of it.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.