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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ACCOUNTING FOR INVESTMENT PROPERTY.PROBLEM 2. PLEASE ANSWER AND SHOW SOLUTION
Transcribed Image Text: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,
Transcribed Image Text: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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