Unit 1 & 2: Investment Property + Noncurrent Assets HFS & Discontinued Operations

Question 1

The classification and presentation requirements of the relevant IFRS, IFRS 5, apply to all recognised current assets and to all disposal groups of an entity.

Answer 1

False. Requirements apply to all recognized non-current assets and all disposal groups.

Question 2

Assets that meet the criteria to be classified as held for sale are to be measured at __________, and depreciation on such assets to cease;

Answer 2

the lower of carrying amount and fair value less costs to sell

Question 3

Which of the following is incorrect regarding the initial measurement of an IP?

a. The investment property shall be measured initially at FV.
b. The cost of purchased IP includes purchase price + any directly attributable expenditure.
c. The initial cost of a property interest held under a lease and classified as an IP shall be the lower of the FV of the property and the present value of the minimum lease payments.
d. If payment for an investment property is deferred, its cost is the cash equivalent.

Answer 3

A. The investment property shall be measured initially at FV.

Question 4

DAE related to IP include:

a. Start-up costs.
b. Initial operating losses incurred before the IP achieves the planned level of occupancy.
c. Abnormal amts of wasted material, labor and other resources in construction or development.
d. Professional fees for legal services, property taxes and other transaction costs.

Answer 4

D. Professional fees for legal services, property taxes and other transaction costs.

Question 5

The fair value of IP shall reflect market conditions at the end of the reporting period.

Answer 5

True.

Question 6

If an office is leased on a furnished basis, FV generally includes the FV of the furniture because the rental income relates to the furnished office.

Answer 6

True.

Question 7

The FV of IP includes prepaid or accrued operating lease income.

Answer 7

False; excludes.

Question 8

When the entity uses the cost model, transfers between IP, OOP and inventory shall be accounted for at __________.

Answer 8

at carrying amount.

Question 9

If OOP is transferred to IP that is to be carried at FV, the difference between the carrying amount and its FV shall be:

a. included in profit or loss
b. included in retained earnings
c. included in equity
d. accounted for as a revaluation of PPE.

Answer 9

d. accounted for as a revaluation of PPE.

Question 10

If an inventory is transferred to investment property that is to be carried at FV, the remeasurement to FV is:

a. included in P&L
b. included in equity
c. included in RE
d. accounted for as a revaluation of inventory.

Answer 10

a. included in profit or loss.

Question 11

When an IP under construction is completed and to be carried at FV, the difference between the carrying amount and FV shall be:

a. included in P&L
b. included in equity
c. included in RE
d. accounted for as a revaluation of PPE.

Answer 11

a. included in P&L.

Question 12

A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and ______.

Answer 12

(a) represents a separate major line of business or geographical area of operations,
(b) is part of a single co‑ordinated plan to dispose of a separate major line of business or geographical area of operations or
(c) is a subsidiary acquired exclusively with a view to resale.

Question 13

When sale of a NCAHS is expected to occur beyond one year, the entity shall measure the costs to sell at their PV.

Answer 13

True.

Question 14

An entity shall recognize a gain for any subsequent increase in FV less CTS of a HFS asset, but not in excess of the cummulative IL that has been reccognized either in accordance with IFRS 5 or previous with IAS 36.

Answer 14

True.

Question 15

A. Property held for sale in the ordinary course of business or in the process of construction or development of such sale;
B. Property being constructed on behalf of third parties; and
C. Property that is being leased out to another entity under a finance lease.

[T/F]. All of the above are examples of investment property.

Answer 15

False.

Question 16

When a property held under a lease is classified as an investment property, the initial cost would be _____________.

Answer 16

the lower between the FV and the PV of minimum lease payments.

Question 17

A property interest held by a lessee under an operating lease may be classified and treated as IP provided that….

Answer 17

a. The property meets the definition of investment property.
b. The operating lease is accounted for as if it were a finance lease.
c. The lessee uses the FV model in measuring the property interest.

Question 18

[T/F]. IP shall be measured initially at its costs, inclusive of its transaction costs.

Answer 18

True.

Question 19

[T/F]. The cost of a self-constructed IP is its cost at the date when the construction is complete.

Answer 19

True.

Question 20

IP may be acquired in exchange for a nonmonetary aset or a combination of monetary and nonmonetary asset. The cost of such is measured at FV, unless the exchange transaction lacks _________.

Answer 20

commercial substance.

Question 21

When the cost model is used, transfers between IP, owner-occupied property and inventory is made at ___________.

Answer 21

carrying amount

Question 22

Transfer from IP carried at FV to owner-occupied property or inventory shall be at ________ which also becomes the deemed cost for subsequent accounting.

Answer 22

fair value

Question 23

If owner-occupied property is transferred to IP at FV, the difference between the new FV and CA shall be accounted for as _________.

Answer 23

a revaluation of property, plant and equipment.

Question 24

If inventory is transfered to IP at FV, the remeasurement to FV is ________.

Answer 24

included in profit or loss.

Question 25

When an investment property under construction is completed and to be carried at FV, the difference between FV and CA shall ________.

Answer 25

be included in profit or loss.

Question 26

[T/F] PAS 41 describes the acctg treatment for IP and related disclosure requirements.

Answer 26

False; PAS 40.

Question 27

[T/F] Entities must recognize in the IP’s CA the cost of day-to-day servicing of such a property.

Answer 27

False.

Question 28

[T/F] The costs of IP include costs incurred initially to acquire an IP and costs incurred subsequently to add to, replace part of, or service a property.

Answer 28

True.

Question 29

[T/F] HFS asset or disposal group must be available for immediate sale in present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be probable.

Answer 29

False; sale must be [highly] probable.

Question 30

[T/F] NCAHS shall not be classified as current assets.

Answer 30

False; shall be!

Question 31

[T/F] If the disposal group is a newly-acquired subsidiary that meets the criteria to be classified as HFS on acquisition, disclosure of the major classes of assets and liabilities is required.

Answer 31

False; disclosure is not required.

Question 32

[T/F] Property that is leased to another entity as a finance lease is considered as IP.

Answer 32

False (unless the lease is an operating one).

Question 33

One or more investment properties may be acquired in exchange for a non‑monetary asset. The cost of such an investment property is measured at fair value unless:

(a) the exchange transaction lacks commercial substance, or:
(b) ____________

Answer 33

(b) the fair value of neither the asset received nor the asset given up is reliably measurable

Question 34

[T/F] For the purpose of determining whether an exchange transaction has commercial substance, the entity‑specific value of the portion of the entity’s operations affected by the transaction shall reflect post‑tax cash flows. The result of these analyses may be clear without an entity having to perform detailed calculations.

Answer 34

True; IAS 40.28

Question 35

An investment property held by a lessee as a right-of-use asset shall be measured initially at its ____ in accordance with IFRS 16.

Answer 35

cost.