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hi sir
if a rival company ows us (my organisation) 100000 $. instead of it debt, it gives us its property of which fair value is 100 000$. do we recognise that property as a non current asset or investment property or we do not recognise it in the SOFP?
i want to note additionally that , for instance, we neither use that property in the course of business nor we dont rent it, just keep it as our property.The double entry is:
Dr TNCA (see next) 100,000
Cr Receivables 100,000Now the question is, is it PPE or is it Investment Property
And the answer to that really is … What are the entity’s intentions with reference to this property?
If it’s just going to be left empty and abandoned, we need to reconsider the valuation because it will rapidly lose its ‘fair’ value
If the entity has no use for the property and has no intention of owner-occupation, presumably the property will be made available for sale and potentially should be classed as available-for-sale as soon as the entity starts actively to market the property at a price they would be prepared to accept
Or if the intention is to hold the property for its income earning potential or capital appreciation, then it should be classified as an investment property
The answer depends entirely on the intentions of the entity
OK?
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