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Hi again chris,
In your practice test question number 2: Which of the properties of lowed plc is subjected to be charged for the annual depreciation?.
Correct answer a property owned by the parent and leased to the subsidiary as an head office.
It is the correct answer only when you are preparing the consolidated sofp. But in Individual accounts of the parent company it will not be depreciated (according to Kaplan). Am I right? Please confirm.
Edit: Im assuming this because In my knowledge lease and rent are both kind of same things, I assume the property was rented to the subsidiary. and we are asked if it would be right to depreciate on our Consolidated accounts or not? Its not mentioned in the question if its for parent’s individual account or the group account
Hello again,
Yes, the property is not depreciated in the parent’s accounts as the subsidiary will have recorded it in their books.
Thanks
Continuing to what you wrote that subsidiary will have the depreciation recorded in their books. The property is leased/rented. Do rented properties depreciate? Or is there a difference between leased and rented? The parent leased the property to the subsidiary. How would subsidiary account it in their books? or do I have to go through ifrs 16 to understand the meaning of it.?
Yes, it might be a bit clearer once you’ve looked at IFRS 16 but if you lease it you effectively own it in substance, so will record it as your asset and depreciate it eve though it is not legally yours.
Sir this would be the last question on this topic hope you won’t mind.
was it a finance lease or an operating lease?
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