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2019 Specimen paper, Q1 (a) investment property, incorrect classification

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › 2019 Specimen paper, Q1 (a) investment property, incorrect classification

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Kim Smith.
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  • October 27, 2020 at 10:29 pm #593309
    amysnowy
    Member
    • Topics: 71
    • Replies: 25
    • ☆☆

    Dear tutor

    for FV model gain recognised in profit and loss,
    -why this gain can’t go to OCI?
    -does the “gain” mean when we remeasure the investment property, there is a higer value than last year, so caused the gain? for cost model, there won’t be any gain ever, is it correct?

    Many thanks

    October 28, 2020 at 7:49 am #593322
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6786
    • ☆☆☆☆☆

    Because that’s where IAS 40 says it goes!

    So every year, the entries for the increase in fair value will be Dr IP Cr Profit or loss (the opposite for a decrease). This means that the IP is shown in SoFP at FV – there is no depreciation.

    The cost model for IP is the same as for PPE under IAS 16. The only gain will be on disposal. But there would be nothing to stop management from changing policy from cost model to FV model – but it couldn’t then switch back again.

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