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a company owns a 10-storey building, which was use as headquarter since 2010 and planned to redevelop the building into a 30 story building using internal funds in 2019. 15 storeys are used for retail shop and the usage of the rest storey has not been determined. How do I allocate the transaction?
This is not the right forum to ask this question. You should ask it in Financial Reporting forum.
For the question, we’ll have to first identify if it is possible to apportion the area of business and remaining portion. If it happens, then we can simply record two different assets in our statement of financial position, one being property and other being investment property (if it meets the IAS 40 criteria).
However if it is not possible to apportion the building between business use and other use, then we’ll have to check which operation is performed in significant portion of the property. If significant portion of the building is used for business purposes, then the whole property will be classified under property, plant and equipment.
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