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Why gain or loss arising from change in fair value of investment property is charged to P/L instead of creating revaluation surplus just as in cost model? And why no depreciation is charged in fair value model?
Because this is how we are told to deal with investment property when we opt for the fair value model! It’s what the standard tells us to do
This is from the http://www.iasplus webpage on IAS 40
“Fair value model
Investment property is remeasured at fair value, which is the amount for which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction. [IAS 40.5] Gains or losses arising from changes in the fair value of investment property must be included in net profit or loss for the period in which it arises. [IAS 40.35]”
OK?
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