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Smithson co purchased a new building with 50 years life for $10 m on 1 January 2003. On 30 June 20×5 Smithson co moved out of the building and rented it out to third parties. Smithson co uses the fair value model for invesment properties
At 30 June 20×5 the fair value of the property was $11 m and at 31 december 20×5 it was $11.5M.
What is the total net amount to be recorded in the statement of profit and loss in respect of the office for the year ended 31 december 20×5?
Answer to this question is $400000My question is why didn’t we take out depreciation of the fair value $11 million from 30 June 20×5 till 31 December 20×5.
Depreciation expense
(01-1-x5 to 30-06-x5) ($10m /50yrs*6/12
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$100000(expense
Fair value
($11m -$11.5m) $500000(incomeTotal net amount which will goes to the profit n loss will be $400000
My question is an asset was revalued to $11M on 30 June 20×5 right, so why we didn’t calculate the depreciation expense of $11M from 30 June 20×5 to 31 december 20×5.
Because it was classified as investment property and investment property under the fair value method is not depreciated
Ok?
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