IAS 40 Flashcards
IAS 40 applies on
properties held for earning rental or capital appreciation or both.
how to account for dual use of property?
-check for legal papers for both sections. if they are separate then use separate standards on both
-if both portions can not be sold separately, check significance.
what is the recognition critera of IAS 40?
-probable that future economic benefits will flow
-cost can be measured reliably
how to account for ancillary services in IAS 40?
Ancillary means side income. For eg. Gym in a hotel.
if rental income is major, use ias 40. if ancillary services income is major, use ias 16.
what are the two measurement models of IAS 40?
-cost model: cost less accumulated depreciation
-revaluation model: property is measured at at FV at each year end, all changes in fair value are taken to PnL. no depreciation. logic: automatic booking
does IAS 40 allow us to apply different measurement models on diff properties?
no. cherry picking not allowed. keep all properties on same model
how will accounting be done if parent has let out building to subsidary ?
in individual books- parent will apply ias 40.
-in group accounts IAS 16 will be applied.
what does IAS 40 say about changing measurement models?
it is allowed if changing increases relevance, reliability and presentation of FS.
IAS 40 says it is highly unlikely that changing from FVM to cost model will increase relevance of financial statements.
how is accounting done when there is a change in use?
In cost model, treatment is same just change the name.
in revaluation model:
revalue according to existing standard (if IAS 16 take gain/loss in FVReserve) then transfer to new accounting standard.)
Scope
Property bought for routine resale - IAS2
Property bought for use in business- IAS16
Construction of property for 3rd party- IFRS15
Construction of property for future owner occupied use (self-construction asset)-IAS16
Construction of building for the future investment property-IAS40
Land bought but no use yet decided by management-IAS40
Property is held for sale but business is not of selling properties -IFRS 5
Accounting treatment if parent is selling a property to subsidary
Not actually a sale because asset is sold inside the group
In parents book, IFRS 5 HFS will apply
In S book, IAS 16
In group books IAS16, and dep will now be booked
