Spectrum Ltd owns the following properties at 1 April 2012: Property A: An office building used by Spectrum for administrative purposes with a depreciated historical cost of $2 million. At 1 April 2021 it had a remaining life of 20 years. After a reorganisation on 1 October 2021, the property was let to a third party and reclassified as an investment property applying Spectrum’s policy of the fair value model. An independent valuer assessed the property to have a fair value of $2•3 million at 1 October 2021, which had risen to $2•34 million at 31 March 2022. Property B: Another office building sub-let to a subsidiary of Spectrum Ltd. At 1 April 2021, it had a fair value of $1•5 million which had risen to $1•65 million at 31 March 2022. Required: Prepare extracts from Spectrum Ltd.’s entity statement of profit or loss and other comprehensive income and statement of financial position for the year ended 31 March 2022 in respect of the above properties. Show all workings. Outline the conditions to be satisfied in order to be recognised as investment property. Outline the initial measurement for investment property.
Spectrum Ltd owns the following properties at 1 April 2012:
Property A:
An office building used by Spectrum for administrative purposes with a
cost of $2 million. At 1 April 2021 it had a remaining life of 20 years. After a reorganisation on 1
October 2021, the property was let to a third party and reclassified as an investment property
applying Spectrum’s policy of the fair value model. An independent valuer assessed the property
to have a fair value of $2•3 million at 1 October 2021, which had risen to $2•34 million at 31
March 2022.
Property B:
Another office building sub-let to a subsidiary of Spectrum Ltd. At 1 April 2021, it had a fair
value of $1•5 million which had risen to $1•65 million at 31 March 2022.
Required:
Prepare extracts from Spectrum Ltd.’s entity statement of profit or loss and other comprehensive
income and
above properties. Show all workings.
Outline the conditions to be satisfied in order to be recognised as investment property.
Outline the initial measurement for investment property.
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