Investment properties

Question 1

What is an investment property?

Answer 1

It is a property that is not used and only used for capital appreciation and rental income

Question 2

What is a capital appreciation?

Answer 2

When assets go up in value

Question 3

Tell me two ways in which we can recognize investment properties

Answer 3

1) Cost Model - Cost - Depreciation

2) Fv Model - FV to FV(At year-end) - difference goes to I/S

Question 4

What happens if we use the assets?

Answer 4

Then it will be normal PPE

Question 5

Where does the rental income get recognized? SFP or I/S

Answer 5

I/S

Question 6

When the investment properties get used by the owner, how does the cost get recognized and how do we calculate this?

Answer 6

The cost will get recognized as a deemed cost and it will need to depreciate accordingly working out the net book value as we are using the asset.

Question 7

If we control or manage the property, is this an investment property or PPE?

Answer 7

PPE because we are in control of the asset

Question 8

What happens if the investment property becomes PPE?

Answer 8

Once you have started using an investment property, then it is classified and accounted for under IAS16 rules with there being a “deemed cost” and then being depreciated subsequently.