Chapter 9: Investment Property Flashcards
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.
Investment Property
These are INVESTMENT PROPERTY:
- 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
Initial Measurement of Investment Property
Cost
Modes of Acquisition
- Cash Purchase
- Installment Purchase
- Non-Exchange Transaction
- Self-Construction
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.
Cash Purchase
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.
Installment Purchase
The cost of an investment property acquired through this is recognized at the FAIR VALUE at the acquisition date.
Non-Exchange Transaction
The cost of an investment property acquired through this is recognized at the FAIR VALUE at the acquisition date.
Non-Exchange Transaction
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.
Self-Construction
In the acquisition mode of self-construction, the construction costs are initially recorded in the:
Construction in Progress (CIP) account
The cost of an investment property does not include the following:
- Start-up Costs
- Operating Losses
- Abnormal Amounts of Wasted Materials
Subsequent Measurement of Investment Properties for GOVERNMENT
Cost Model
- Cost less Accumulated Depreciation and Accumulated Impairment Losses
Is the subsequent measurement of the fair value model applicable to governments?
Naur. Only the cost model.
Transfers to or from investment property shall be made only when there is a:
Change in Use
Transfers To or From Investment Property:
- Investment Property to Owner-Occupied Property
- Owner-Occupied Property to Investment Propety
- Inventories to Investment Property
- Investment Property to Inventories
Is there a gain or loss arising from transactions relating to transfers to and from investment property?
Naur, except when the transferred asset is impaired, in which case, impairment loss shall be recognized.
JE from PPE to IP
Investment Property xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss. xx
Building xx
JE from Inventories to IP
Investment Property xx
Merchandise Inv. xx
JE from IP to PPE
Buildings xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss xx
Investment Property xx
JE from IP to Inventories
Merchandise Inv. xx
Accum. Dep. - Bldg. xx
Accum. Imp. Loss xx
Investment Property xx
When is an investment property DERECOGNIZED?
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.
Formula for the Gain or Loss
Proceeds - Carrying Amount
An asset is impaired if the:
Carrying amount exceeds its recoverable amount.
The excess of carrying amount and recoverable amount represents:
Impairment Loss
This is the higher of an asset’s FVLCS and VIU.
Recoverable Amount
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.
Value in Use
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.
Cash Generating Use (CGU)
When an impairment loss is recognized in CGU, the impairment loss is:
Allocated to the individual assets in the CGU on a pro-rata basis.
In allocating the impairment loss in CGU, the carrying amount of individual assets shall not be reduced below the highest of:
- FVLCS
- VIU
- Zero
In making impairment loss assessment, the entity shall also assess the exact opposites of the indications for impairment.
True or False?
True
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.
Reversal of Impairment
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?
Naur.
The reversal of impairment is recognized in:
Surplus or Deficit
Formula for CA had no Impairment Loss has been recognized
Historical Cost - Accumulated (Original) Depreciation
- You do not use the revised annual depreciation on this part.
Compensation from THIRD PARTIES for an investment property that was IMPAIRED, LOST, or GIVEN UP shall be recognized in ___________ when the compensation becomes RECEIVABLE.
Surplus or Deficit
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?
Naur.
