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Hello,
In my textbook, it says
“If a building is rented by a subsidiary of the entity, then the building will be classed as an investment property in the individual accounts, but will be classed as property, plant and equipment per IAS 16 in the consolidated financial statements.
This is because the asset will be used by the group, so must be accounted for in accordance with IAS 16.”
I didn’t quite understand why it is so.
Why can’t we also classify it as Investment property in the consolidated financial statements?
Thank you.
Hi,
If the property is rented to a subsidiary within the group then the property is not being rented outside of the group. It is therefore not being held for investment purposes by the group and so is accounted for as PPE given that it is still being used by the group itself. Remember that group accounting looks at everything from a single entity (group) perspective.
Thanks,
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