Investment Properties

Question 1

Are investment properties recognised as assets?

Answer 1

Yes because:
* The future economic benefits will flow to the entity
* The cost of the property can be reliably measured

Question 2

With joint-use properties, in what case may the components need to be recognised separately?

Answer 2

• If each portion can be sold or leased separately, they’re recognised separately
• If each portion cannot be sold separately, entire property is investment property if owner occupied portion is insignificant
• Judgement is required

Question 3

For investment property, what models does the IAS40 permit entities to choose between?

Answer 3

Cost model and Fair value model (only one method must be adopted unless it results in a more appropriate presentation)

Question 4

What principles apply if the fair value model is selected? (Hint: investment property)

Answer 4

• Investment property must be initially measured at cost
• Re-measure the investment property to fair value at the end of the reporting period

Question 5

What is the difference between IAS 16 Revaluation Model and IAS 40 Fair Value Model?

Answer 5

Revaluation model - IAS 16:
* Depreciation provided on the revalued amount
* Revaluation adjustments recognised in other comprehensive income

Fair value model - IAS 40:
* There is no depreciation
* Fair value adjustments are recognised in the statement of profit or loss

Question 6

When does derecognition happen?

Answer 6

When the investment property is permanently withdrawn from use and has no further economic benefit

Question 7

What is stated in the Statement of Compliance?

Answer 7

“These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS)”

Question 8

What is stated in the basis of preparation?

Answer 8

“The financial statements are prepared on the historic cost basis except for the valuation of certain properties that are measured on the fair value basis”

Question 9

What is the Accounting Policy notes for PPE?

Answer 9

Land and buildings held for admin purposes are stated at accumulated depreciation and impairment losses
Land is not depreciated. Depreciation is recognised as the cost - residual value / useful life; using the straight line method.

Question 10

What is the Accounting Policy notes for Investment Property?

Answer 10

Investment properties are held to earn rentals or for capital appreciation
Investment properties are measured initially at cost. After, they are measured at fair value. Gains or loses are included in the profit or loss in the period they arise.