ADVANCED FINANCIAL ACCOUNTING (ACC 4002)
LECTURE QUESTION: INVESTMENT PROPERTY
Ocho Rios Development Limited bought an office building on 1 January 2016 for
$20,000,000. The building was classified as property plant and equipment under IAS 16
and depreciated over 40 years with no residual value.
On January 1, 2020 the office was transferred to Investment Property under IAS40, using
the fair value model. On 1 January 2020, the fair value of the property was assessed at
$24,000,000 and on 31 December 2020 the fair value was $25,000,000.
REQUIRED:
1. The Statement of Comprehensive Income (extract) for the year ended 31 December
2020
2. The Statement of Financial Position (extract) as at 31 December 2020
PPE – IAS 16
$
Cost of building
20,000,000
Acc. Depreciation (20,000,000 – 0)/40 *4yrs
2,000,000
Carrying value 1 Jan 2020
18,000,000
FV at 1 Jan 2020
24,000,000
Revaluation Surplus / gain (CV – FV)
6,000,000
Investment Proportion IAS – 40
CV of Investment Proportion 1 Jan 2020
24,000,000
FV at 31 December 2020
25,000,000
FV Gain – SOCI
1,000,000
Extract of Statement of Financial Position as at 31 December 2020
$
$
Non-Current Assets
Investment Property
25,000,000
Reserves
Revaluation Surplus
6,000,000
Retained earnings: FV gain on Invest. property
1,000,000
Extract Statement of Profit or Loss & Comprehensive income for the year end 31 December 2020
Depreciation (20,000,000)/40)*4yrs
Gain on Investment property
2,000,000
1,000,000
Other Comprehensive Income
Revaluation Surplus
Note: if the carrying value is more than the fair value, there is an impairment loss.
6,000,000