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Speculate owned an office building with a depreciated historical cost of 2 million and a remaining useful life of 20 years at 1 april 20×2. On 1 october 20×2 speculate ceased to occupy the building and let it out to a third party. The property was reclassified as an investment property, applying the fair value model in accordance with IAS 40 investment property, the value of property was independently asssessed at 2.3 million at 1 october 20xw and had risen to 2.34 million by 31 march 20×3. What amount will be charged or credited to profit or loss in respect this property for year end 31 march 20×3?
The workings will be
Depreciation $ 2 million / 20 years = $ 50.000 (of course it will go to SPOL)
Then revaluation surplus ( $2.3 million -2.4 million ) = $40.000 (why will it be charged to SPOL instead of OCI?)
And the revaluation of $2 million – $2.3 will go to OCI
What makes the difference between the revaluation that goes to SPOL and OCI? thank you so much
Hi,
Once the property is classified as an IP then any subsequent gains/losses go through profit or loss in accordance with IAS 40. So when it is revalued at the reporting date from $2.3 million to $2.34 million, the gain of $0.04 million will go through profit or loss.
Sorry for the delay in responding, it’s been a busy week.
Thanks
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