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UNDER INITIAL MEASUREMENT it was written,
”A property interest held under a lease and classified as an investment property shall be accounted for as if it were a finance lease. The asset is recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount is recognised as liability”. sir I could not get these lines.
transfer from investment property to owner occupied property
original cost on 1 jan 2000= 250000
depn for 50 yrs
on 31 dec 2009 fair value= 350000
how will this appear in the financial statements at 31 dec 2009?sir while transferring from investment to owner occupied we should not calculate depreciation right?
my solution is:revaluation amount= 350000
original cost =250000
now 100000 goes to profit loss account under the heading of Other Income.As revaluation was made on 31 dec 2009 so in our balance sheet of dec 2009, do we put revalued amount or our Carrying value. ? As far my understanding from F3, we put revalued amount but I am little confused.
In answer to your first post, if the interest in the property is through a finance lease, then it shall be treated under “normal” finance lease accounting ie Dr Investment Property and Cr Obligations under Finance Lease account at the lower of cost and present value of minimum lease payments
In answer to your second post, it’s not clear whether the title is appropriate ie is this a question where, after ten years, the entity is reclassifying as investment property?
It seems to me that that is the case, but it’s not unambiguous!
For each of the first ten years there will have been a depreciation charge of $5,000 bringing carrying value down to $200,000 by the end of 2009
Now, upon reclassification, the increase of $150,000 to fair value of $350,000 should be credited to a revaluation reserve and, as at the 2009 year end SoFP the investment property will be shown at $350,000
1..sir in my first post I have still doubt. does it mean investment property held under finance lease should capitalise the interest paid ? i could not get the meaning of your answer.
2.in my 2nd question originally it is ” transfer from owner occupied property to investment property” but I reversed it and asked you.
so the original question is, A business owns a building which it has been using as a head office. In order to reduce costs, on 30 june 2009 it move its head office functions to one of its production centres and is now letting out its head office. Company policy is to use the fair value model for investment property.
the building had an original cost on 1 jan 2000 of 250000 and was being depreciated over 50 yrs. At 31 dec 2009 its fair value was judged to be 350000.
how will this appear in financial statements at 31 dec 2009.I reversed from ” transfer from owner occupied to investment property’ to ” transfer from investment to owner occupied’
Why are you talking about “interest paid”?
If it had been investment property for the last ten years, there will have been revaluations carried out each year with any movement in value going to PorL
There isn’t going to be a one off valuation from 250,000 to 350,000 after ten years.
In this respect, your entire question is invalid. Sorry 🙁
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