Chapter 9: Investment Property

Question 1

This is a land and/or building held for rentals or capital appreciation. It is NOT held for use in the production or supply of goods or services nor for administrative purposes or sale.

Answer 1

Investment Property

Question 2

These are INVESTMENT PROPERTY:

Answer 2

• Held for long-term capital appreciation
• Land held for currently undetermined future use
• Leased out under operating leases
• Vacant but held to be leased under operating leases
• Being constructed/developed for future use as an investment property
• SIGNIFICANT PORTION is held to earn rentals or for capital appreciation

Question 3

Initial Measurement of Investment Property

Answer 3

Cost

Question 4

Modes of Acquisition

Answer 4

• Cash Purchase
• Installment Purchase
• Non-Exchange Transaction
• Self-Construction

Question 5

The cost of an investment property acquired through this comprises the purchase price and any direct costs necessary in bringing the asset to its intended condition.

Answer 5

Cash Purchase

Question 6

The cost of an investment property acquired through this is the cash price equivalent. The difference between this amount and the total payments is recognized as INTEREST EXPENSE.

Answer 6

Installment Purchase

Question 7

The cost of an investment property acquired through this is recognized at the FAIR VALUE at the acquisition date.

Answer 7

Non-Exchange Transaction

Question 8

The cost of an investment property acquired through this is recognized at the FAIR VALUE at the acquisition date.

Answer 8

Non-Exchange Transaction

Question 9

The cost of an investment property includes the costs of direct materials, labor, and construction overhead. The cost of wasted materials, labor, and other resources are expensed.

Answer 9

Self-Construction

Question 10

In the acquisition mode of self-construction, the construction costs are initially recorded in the:

Answer 10

Construction in Progress (CIP) account

Question 11

The cost of an investment property does not include the following:

Answer 11

• Start-up Costs
• Operating Losses
• Abnormal Amounts of Wasted Materials

Question 12

Subsequent Measurement of Investment Properties for GOVERNMENT

Answer 12

Cost Model
- Cost less Accumulated Depreciation and Accumulated Impairment Losses

Question 13

Is the subsequent measurement of the fair value model applicable to governments?

Answer 13

Naur. Only the cost model.

Question 14

Transfers to or from investment property shall be made only when there is a:

Answer 14

Change in Use

Question 15

Transfers To or From Investment Property:

Answer 15

• Investment Property to Owner-Occupied Property
• Owner-Occupied Property to Investment Propety
• Inventories to Investment Property
• Investment Property to Inventories

Question 16

Is there a gain or loss arising from transactions relating to transfers to and from investment property?

Answer 16

Naur, except when the transferred asset is impaired, in which case, impairment loss shall be recognized.

Question 17

JE from PPE to IP

Answer 17

Investment Property xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss. xx
Building xx

Question 18

JE from Inventories to IP

Answer 18

Investment Property xx
Merchandise Inv. xx

Question 19

JE from IP to PPE

Answer 19

Buildings xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss xx
Investment Property xx

Question 20

JE from IP to Inventories

Answer 20

Merchandise Inv. xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss xx
Investment Property xx

Question 21

When is an investment property DERECOGNIZED?

Answer 21

When it is disposed of or when it is permanently withdrawn from use and no future economic benefits or service potential is expected from its disposal.

Question 22

Formula for the Gain or Loss

Answer 22

Proceeds - Carrying Amount

Question 23

An asset is impaired if the:

Answer 23

Carrying amount exceeds its recoverable amount.

Question 24

The excess of carrying amount and recoverable amount represents:

Answer 24

Impairment Loss

Question 25

This is the higher of an asset’s FVLCS and VIU.

Answer 25

Recoverable Amount

Question 26

This is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life.

Answer 26

Value in Use

Question 27

This is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use.

Answer 27

Cash Generating Use (CGU)

Question 28

When an impairment loss is recognized in CGU, the impairment loss is:

Answer 28

Allocated to the individual assets in the CGU on a pro-rata basis.

Question 29

In allocating the impairment loss in CGU, the carrying amount of individual assets shall not be reduced below the highest of:

Answer 29

• FVLCS
• VIU
• Zero

Question 30

In making impairment loss assessment, the entity shall also assess the exact opposites of the indications for impairment.

True or False?

Answer 30

True

Question 31

This is a significant increase in the asset’s market value - rather than a decline. This also pertains to significant changes in factors that FAVORABLY affect the recoverable amount if an asset, rather than adversely.

Answer 31

Reversal of Impairment

Question 32

Can a reversal of impairment result to a carrying amount in excess of the asset’s carrying amount had no impairment loss been recognized in the prior periods?

Answer 32

Naur.

Question 33

The reversal of impairment is recognized in:

Answer 33

Surplus or Deficit

Question 34

Formula for CA had no Impairment Loss has been recognized

Answer 34

Historical Cost - Accumulated (Original) Depreciation

• You do not use the revised annual depreciation on this part.

Question 35

Compensation from THIRD PARTIES for an investment property that was IMPAIRED, LOST, or GIVEN UP shall be recognized in ___________ when the compensation becomes RECEIVABLE.

Answer 35

Surplus or Deficit

Question 36

Can a reversal of impairment result to a carrying amount in excess of the asset’s carrying amount had no impairment loss been recognized in the prior periods?

Answer 36

Naur.