- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Hey Sir, one of the subsequent methods of measuring “investment property” is the fair value model. Relative to that, there is a part in my text book which says, “When a lessee uses the fair value model to measure an investment property that is held as a right of use asset, it must measure the right of use asset, not the underlying property at fair value”.
Can you please explain what this means sir.Thanks.
Hi,
It is saying that we should use the fair value of the lease and not the fair value of the actual property itself. So the fair value of the lease/right-of-use asset would be measured as the value of the lease liability (assuming it were to be leased today over the remaining life of the lease, don’t forget that the market might dictate that this could be higher than our current lease rentals) plus the direct costs that would be incurred.
Thanks
- You must be logged in to reply to this topic.