ABC Shopping Inc., a listed company in the Philippines, ventured into construction of a mega shopping mall. The company's board of directors aftermarket research decided that instead of selling the shopping mall to a local investor, who had approached them several times during the construction period with excellent offers which he progressively increased duringnthe year of construction, the company would hold this property for the purposes of earning rentals by letting out space in the shopping mall to tenants. Within months of the completion of the construction the shopping mall was fully let out. The construction of the shopping mall was completed and tge property was placed in service at the end of 2018. According to the company's engineering department the computed total cost of the construction of the shopping mall was P100 million. An independent valuation expert was used by the company to fair value the shopping mall on an annual basis. According to the fair valuation expert the fair values of the shopping mall at the end of 2018 and at each subsequent year-end thereafter were: 2018 P100 Million 2019 P120 Million 2020 P125 Million 2021 P115 Million a. What would be the impact on the 2021 profit and loss account of company ifnit decides to treat the shopping mall as an investment property under PAS 40 using the "faur value model"? Indicate if increase pr decrease. b. What would be the impact on the 2021 profit and loss account of the company if it decides to treat the shopping mall as an investment property under PAS 40 using the "cost model"? Indicate if increase or decrease.
ABC Shopping Inc., a listed company in the Philippines, ventured into construction of a mega shopping mall. The company's board of directors aftermarket research decided that instead of selling the shopping mall to a local investor, who had approached them several times during the construction period with excellent offers which he progressively increased duringnthe year of construction, the company would hold this property for the purposes of earning rentals by letting out space in the shopping mall to tenants. Within months of the completion of the construction the shopping mall was fully let out.
The construction of the shopping mall was completed and tge property was placed in service at the end of 2018. According to the company's engineering department the computed total cost of the construction of the shopping mall was P100 million. An independent valuation expert was used by the company to fair value the shopping mall on an annual basis. According to the fair valuation expert the fair values of the shopping mall at the end of 2018 and at each subsequent year-end thereafter were:
2018 P100 Million
2019 P120 Million
2020 P125 Million
2021 P115 Million
a. What would be the impact on the 2021
b. What would be the impact on the 2021 profit and loss account of the company if it decides to treat the shopping mall as an investment property under PAS 40 using the "cost model"? Indicate if increase or decrease.
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