Ias 40 Questions And Answers Pdf
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- IAS 40 Investment Property Questions! Quiz
- Recent questions and answers in IAS 40 - Investment Property
- Quiz: IAS 40 Investment Property (Conceptual)
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IAS 40 Investment Property Questions! Quiz
This Standard deals with the accounting treatment of investment property and provides guidance for the related disclosure requirements. Owner Occupied Property IAS 16 , d The property which is occupied by employees, being provided by employer as part of remuneration package whether or not the employee pays rent e The property which is held to be leased out, under a finance lease.
The properly held by lessee under operating lease, and lessee has the right to:. The property with such rights is called Property Interest.
This Standard provides an option for such kind of Property interest, can be recognized as Investment Property, in the financial statements of lessee , under Fair Value model.
This classification option is applicable upon each Property Interest on property-by-property basis. If this classification option is opted for one such Property Interest , all other Investment Properties have to be accounted for under fair value model, and such classification option should be included in the disclosures. If a property is being under dual-use i. Such property will be accounted for as:. If in case of a certain property, an entity provides ancillary services to the occupants of a property, the entity shall apply the following:.
The property which is leased to, the Parent Co. However, the property will remain Investment Property in the individual financial statements of the entity who owns it.
The cost of Investment Property includes:. The entity which chooses Cost model to account for its Investment Property after initial recognition, will measure the investment Property as per Cost Model rules prescribed in IAS 16 i. Cost less Accumulated Depreciation less Accumulated impairment loss. The entity which chooses Fair Value model to account for its Investment Property after initial recognition, will measure the investment Property at Fair Value.
The fair value of the investment property is determined as per the requirements of IFRS 13; however the entity should also consider the following points;. The transfer of property will take place, if there is change in the use of property such As: a The development of investment property, to be sold in the normal course of business, will result in transfer of property from IAS 40 to IAS 2. The investment property will be derecognized from the financial statements, under following situations:.
The entity should disclose the following: a The measurement model used by the entity i. AB Ltd is local government organization that owns a credible portfolio of properties which includes the properties which are surplus to the functional requirements and some other properties which are held by the entity for different purposes. The portfolio includes several plots of land which are held for capital appreciation and may be sold in the future.
The entity has also some properties which have no current purpose, as the entity has not yet determined whether it will use those properties to provide services such as those provided by national parks or will put these on sales in the ordinary course of business.
AB Ltd also has a housing department to deal with regular sale and purchase of some plots of land included within the portfolio of the properties, in the normal course of business to supplement its income. Parts of the portfolio, some properties which are not held for sale, are provided as a housing facility to low-income employees at nominal rentals, which are then used to cover the cost of maintenance of the properties.
Required; How the properties included in the portfolio will be accounted for in the financial statements of AB Ltd. Therefore, the plots of land which are held by the entity for capital appreciation and the properties that has no current purpose are both covered by IAS 40 as investment property as they satisfy the definition criteria.
And the plots of land which are held for sale in the normal course of business, by housing department will be treated as inventory under IAS 2. Whereas, the properties which are not held for sale and are provided to low income employees as a housing facility as part of the business will be accounted for as property plan and equipment under IAS 16, as these are not primarily held for rental earnings, which is reflected by the lower rentals.
Property X: A headquarter building is held by the entity for administrative use. At 1 July , the entity under goes a reorganization and as a result, the property was let out to a third party and reclassified as an investment property under fair value model as per IAS The property will be treated as owner occupied property under IAS 16 in consolidated financial statements, from the group perspective.
Have you forgotten your password? Are you a new user? Sign up or. Objective This Standard deals with the accounting treatment of investment property and provides guidance for the related disclosure requirements.
Scope The requirements of this Standard are applicable to deal with the accounting treatment of Investment Property. This Standard also applies to: The books of lessee, for the accounting treatment of Property Interest held by lessee. The books of lessor, for the accounting treatment of Investment Property provided to lessee under operating lease. The Standard does not cover the followingaspects: a For the classification of lease contracts, b Treatment of Rental income related to investment property as covered in IAS Dual-Purpose Properties If a property is being under dual-use i.
If in case of a certain property, an entity provides ancillary services to the occupants of a property, the entity shall apply the following: The property will be Investment Property, if quantum of the services is immaterial or insignificant.
For example security or maintenance services. The property will not be Investment Property, if quantum of the services is material or significant. For example, owner-managed hotel. Initial Recognition A property will be recognized as Investment Property if it meets the following criteria: The definition of Investment Property If future economic benefits are probable to flow to the entity Its cost is reliably measurable.
If the Investment Property is purchased on extended credit period, the cost of the property will be cash price equivalent and any excess over cash price will be treated as interest expense and will be recognize over the period of credit. If lessee chooses to recognize the Property Interest as Investment Property as per classification option available in IAS 40, then the initial cost of such a Property Interest shall be prescribed, as for finance lease under IAS Therefore, such a Property Interest will be recognized at the lower off: The Present value of minimum lease payments and.
Fair value of the Property Interest or The entity will also recognize a liability with an equivalent amount. Subsequent Recognition: Any expenditure upon Investment Property, during the life of Investment Property will be recognize in the carrying amount of investment property, if such expense results in increase in economic benefits of the investment property that would obtain otherwise.
Any other expense to maintain the Investment Property will be treated as expense in the statement of profit or loss. Subsequent Measurement: 1 The entity has two options to account for the Investment Property at reporting date; Cost Model Fair Value Model 2 Whichever model is chosen, it should be applied for all the Investment Properties held by the entity. Under fair vale model, the investment property will be measured at fair value on reporting date.
Any change increase or decrease in the fair value of investment property at reporting date, will be reported to the statement of profit or loss. Investment property under fair value model is not depreciated. Once the entity opts to use the fair value model, it should be used for all the investment properties, except the Investment property for which fair value is not available under specified circumstances.
The entity which has opted to measure an investment property at fair value, it will continue to measure the property at fair value, up to the date of disposal or until the date of change in use of the property. Fair Value Determination: The fair value of the investment property is determined as per the requirements of IFRS 13; however the entity should also consider the following points; The fair value should be determined as per the current condition of the investment property, in the current market conditions.
If in exceptional circumstances, the fair value of a certain investment property is not determinable and alternative reliable measurements discounted cash flows are also not available, then entity should measure such investment property under cost model till the date of disposal and residual value of such property will assumed to be zero.
If the fair value of an investment property being constructed is not available,and entity estimates that the fair value of such property will be determinable upon its completion, then in such circumstances entity should account for the investment property being constructed under cost model until Its fair value becomes available or Construction work is finished 3 A property interest held by a lessee, which is classified as an investment property as per classification option available in IAS 40, will be accounted for using the requirements of fair value model.
Transfers The transfer of property will take place, if there is change in the use of property such As: a The development of investment property, to be sold in the normal course of business, will result in transfer of property from IAS 40 to IAS 2.
In all such circumstances the entity will apply the following accounting treatment: If a property is transferred from inventory IAS 2 to investment property IAS 40 , it will be measured at fair value, any difference between the fair value of property and its previous carrying value under IAS 2 will be reported in the statement of profit or loss on the date of reclassification.
Subsequently, the entity will apply fair value model under IAS If a property is transferred from owner-occupied IAS 16 to investment property IAS 40 which will be measured at fair value, the entity will apply IAS 16 rules up to the date of reclassification. When the development of the investment property under construction is completed, which will be measured under fair value model, any resulting difference between its fair value and carrying value will be reported to the statement of profit or loss.
De-recognition of Investment Property The investment property will be derecognized from the financial statements, under following situations: Upon disposal of Investment property or When no economic benefits are available either by use of property or from its sale However, any gain or loss, resulting from the disposal of investment property will be charged to statement of profit or loss in the related period.
Any compensation recoverable from any third parties will be recognized in statement profit or loss, in respect of investment property which was impaired or lost, in the period in which it becomes receivable. Disclosures 1. Owner Occupied Property IAS 16 and Property held for sale in normal course of business IAS 2 A property will be recognized as Investment Property if it meets the following criteria: The definition of Investment Property It is probable that future economic benefits ill flow to the entity The cost is reliably measurable.
Examples 2: AB Ltd owns two properties at 1 January Property X: A headquarter building is held by the entity for administrative use. Solution: a Extracts of AB Ltd. Quote Guest , 15 August, Quote Sandesh , 9 November, I think you forgot to mention, in transfer from Inv.
A profit or loss does occur on the date of change if FV and carrying amount are different. Add New Comment. Do you want to enable smileys in this message? Start free Ready Ratios reporting tool now! Login to Ready Ratios.
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Recent questions and answers in IAS 40 - Investment Property
Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Although you need not be a member to ask questions or provide answers, we invite you to register an account and be a member of our community for mutual help. You can register with your email or with facebook login in few seconds. You can register with your email or with facebook login in few seconds Get AccountantAnswer App. Property held for sale is temporarily being rented out, does it need to be classified as IAS 40? Depreciation of leasehold land taken on perpetual lease from Government. IAS 40 : Investment Property : Building which is constructed on leased land given on operating lease.
Quiz: IAS 40 Investment Property (Conceptual)
Initial measurement: Investment property is initially measured at cost, including transaction costs. Such cost should not include start-up costs, abnormal waste, or initial operating losses incurred before the investment property achieves the planned level of occupancy. After initial recognition, investment property is accounted for in accordance with the cost model as set out in IAS 16 Property, Plant and Equipment cost less accumulated depreciation and less accumulated impairment losses. The gain or loss on disposal should be calculated as the difference between the net disposal proceeds and the carrying amount of the asset and should be recognised as income or expense in the income statement. The gain was not recorded through profit and loss account.
Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Issued: in ; re-issued in , followed by amendments Effective date: 1 January What it does: IAS 40 defines investment property as property land, building, part of a building or both held to earn rentals or for capital appreciation or both, regardless the way of holding it by the owner or under the finance lease as the lessee.
Financial Reporting — Paper 8 31 May, Page 6 of 9 Question 3 a IAS Investment Property defines investment property as property land or buildings or part of the building or both held to earn rentals or for capital appreciation or both. It further specifies the conditions for recognition and measurement of assets classified as investment property. Required: Discuss the conditions that should be satisfied for an investment property to be recognised as an asset in the financial statements and exceptions of assets that should not be classified under investment property. During the year ended 31 December, Nyumbani Ltd constructed its head offices valued at Shs million on the land whose cost was Shs 80 million and nothing has yet been decided on what it should use the land that cost Shs million. The prices of land in Uganda and Kampala in particular are increasing day by day because of high demand and inflation.
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Безопасность шифра не в том, что нельзя найти ключ, а в том, что у большинства людей для этого нет ни времени, ни необходимого оборудования. Стратмор покачал головой: - Это шифр совершенно иного рода. - Иного рода? - Сьюзан смотрела на него вопрошающе.
Он получил кольцо. До смерти напуганный, Двухцветный замотал головой: - Нет. - Viste el anillo.