PAS 40

Question 1

What is PAS 40?

Answer 1

Investment property

Question 2

“property (land or a building- or a part of a building - or both) held (by the owner or by the lessee under finance lease) to earn rentals or for capital appreciation or both

Answer 2

Investment property

Question 3

a leasing arrangement in which the lessee obtains ownership of the leased asset by the end of the lease term.

Answer 3

finance lease

Question 4

Investment property or Owner-occupied Property

-Held to earn rentals or for capital appreciation or both.

Answer 4

Investment property

Question 5

Investment property or Owner-occupied Property

-Held for use in the production or supply of goods or services or for administrative purposes.

Answer 5

Owner-occupied Property

Question 6

Investment property or Owner-occupied Property

-Generates cash flows largely independently of the other assets held by an entity

Answer 6

Investment Property

Question 7

Investment property or Owner-occupied Property

-Generates cash flows in conjunction with the other assets held by an entity.

Answer 7

Owner-occupied Property

Question 8

Investment property or Owner-occupied Property

-Includes only land and building

Answer 8

Investment Property

Question 9

Investment property or Owner-occupied Property

-May include assets other than
land and building

Answer 9

Owner-occupied Property

Question 10

Accounted for under PAS 40

Answer 10

Investment Property

Question 11

Accounted for under PAS 16

Answer 11

Owner-occupied Property

Question 12

Examples of investment property:

Answer 12

a. Land held for long-term capital appreciation rather than for short-term sale in the ordinary course of business.
b. Land held for a currently undetermined future use.
c. A building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases.
* An operating lease is a contract that permits the use of an asset but does not convey ownership rights of the asset.
d. A building that is vacant but is held to be leased out under one or more operating leases.
e. Property that is being constructed or developed for future use as investment property

Question 13

Examples of items that are not investment property:

Answer 13

a. Property intended for sale in the ordinary course of business or property acquired exclusively with a view to subsequent disposal in the near future or for development and resale.
b. Property being constructed or developed on behalf of third parties (PFRS 15 Revenue from Contracts with Customers).
c. Owner-occupied property (PAS 16) and owner-occupied property awaiting disposal.
d. Property that is leased to another entity under a finance lease.

Question 14

a contract that permits the use of an asset but does not convey ownership rights of the asset.

Answer 14

operating lease

Question 15

leasing arrangement in which the lessee obtains ownership of the leased asset by the end of the lease term.

Answer 15

finance lease

Question 16

Property that is partly investment property and partly owner-occupied:

Answer 16

• If the portions could be sold separately (or leased out separately under a finance lease), an entity accounts for the portions separately.
• The portion being rented out under operating lease is classified as investment property and the portion used as owner-occupied is classified as property, plant, and equipment.
• If the portions could not be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.
• If the owner-occupied portion is significant, the entire property is classified as property, plant, and equipment.

Question 17

Ancillary services to occupants:

Answer 17

• When ancillary services are provided to the occupants of a property held, the property is classified as investment property if the services are insignificant to the arrangement, as a whole.

Question 18

Initial measurement of Investment property:

Answer 18

Cost

Question 19

Subsequent measurement of Investment property:

Answer 19

Either the Cost model or Fair value model

Question 20

The following are excluded from the cost of investment property and are expensed immediately:

Answer 20

a. Start-up costs (unless they are necessary to bring the property to the condition necessary for it to be capable of operating in the manner intended by management)
b. Operating losses incurred before the investment property achieves the planned level of occupancy
c. Abnormal amounts of wasted material, labor or other resources incurred in constructing or developing the property

Question 21

A change from the cost model to the fair value is accounted for _______________.

Answer 21

prospectively

Question 22

True or false?

A change from the fair value model to the cost model is permitted.

Answer 22

not permitted- false

Question 23

True or false

PAS 40 not requires all entities to determine the fair value of investment property whether it uses the cost model or fair value model.

Answer 23

requires- false

Question 24

true or false

Fair values determined are used for measurement and disclosure purposes if the entity uses the fair value model and for disclosure purposes only if the entity uses the cost model.

Answer 24

True

Question 25

After initial recognition, an entity that chooses the fair value model shall measure all of its investment property at ________________, except in cases where the exemptions under PAS 40 apply.

Answer 25

fair value

Question 26

Changes in fair values are recognized in _________________

Answer 26

profit or loss.

Question 27

True or false Depreciable assets classified as investment property measured under fair value model are depreciated.

Answer 27

not depreciated- false

Question 28

If the fair value of an item of investment property cannot be determined reliably on initial recognition, such item is subsequently measured under the ___________________.

Answer 28

cost model

Question 29

After initial recognition, an entity that chooses the cost model shall measure all of its investment property at _____________________________________ in accordance with PAS 16 Property, Plant, and Equipment.

Answer 29

cost less any accumulated depreciation and impairment losses

Question 30

Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by:

Answer 30

a. Commencement of owner-occupation, for a transfer from investment property to owner-occupied property; b. Commencement of development with a view to sale, for a transfer from investment property to inventories; c. End of owner-occupation, for a transfer from owner-occupied property to investment property; or d. Commencement of an operating lease to another party, for a transfer from inventories to investment property.