ACCOUNTING FOR INVESTMENT PROPERTY.PROBLEM 2. PLEASE ANSWER AND SHOW SOLUTION PROBLEM 20-2: Classification issues1) SME constructs a 3-storey building of which it currently rents out 1 floorand occupies the other 2 floors. The floors could not be sold separately.2) SME bought several properties in Britain, which it rents out. However, oneof the buildings is located in a poor and neglected area of a small town andfinding tenants is difficult. The building has been vacant for over a yearnow.3) SME bought three properties in Singapore that it intends to rent out in thefuture. At the date of acquisition there was no active market in the relevantlocations. According to management it is therefore not possible to measurethe fair value of the properties reliably, 4. If management decides to use the fair value model to value its investmentproperty, but it would still like to measure the investment properties inSingapore at cost, is that acceptable?Yes because PAS 40 allows the use of fair value model on a property forа.property basisb. NoYes only if it is really impossible to determine the fair value reliablyd. Yes for as long as this policy is consistently appliedс.

The question is based on the concept of Accounting Standard on Investment Property. As per the…

Answered: PROBLEM 20-2: Classification issues 1)…

PROBLEM 20-2: Classification issues 1) SME constructs a 3-storey building of which it currently rents out 1 floor and occupies the other 2 floors. The floors could not be sold separately.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Real Estate

Real estate means ownership of land along with the assets and natural resources that exist on the land. These properties are in real/physical form which is tangible. Real estate simply means land or addition made to land permanently like constructing a residence or different buildings. People invest in real estate to either reside or for wealth creation. Many people investing in real estate further lend the place for occupation or businesses in return for a monthly payment.

Question

ACCOUNTING FOR INVESTMENT PROPERTY.PROBLEM 2. PLEASE ANSWER AND SHOW SOLUTION

PROBLEM 20-2: Classification issues
1) SME constructs a 3-storey building of which it currently rents out 1 floor
and occupies the other 2 floors. The floors could not be sold separately.
2) SME bought several properties in Britain, which it rents out. However, one
of the buildings is located in a poor and neglected area of a small town and
finding tenants is difficult. The building has been vacant for over a year
now.
3) SME bought three properties in Singapore that it intends to rent out in the
future. At the date of acquisition there was no active market in the relevant
locations. According to management it is therefore not possible to measure
the fair value of the properties reliably,

4. If management decides to use the fair value model to value its investment
property, but it would still like to measure the investment properties in
Singapore at cost, is that acceptable?
Yes because PAS 40 allows the use of fair value model on a property for
а.
property basis
b. No
Yes only if it is really impossible to determine the fair value reliably
d. Yes for as long as this policy is consistently applied
с.

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