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Dec 2009 Q2 Sandown

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Dec 2009 Q2 Sandown

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by MikeLittle.
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  • June 1, 2014 at 5:39 am #172248
    pagermm
    Member
    • Topics: 13
    • Replies: 13
    • ☆

    Dear Mike,

    (iv) During the year Sandown sold an available-for-sale investment for $ 11 million. At the date of sale it had a carrying amount of $8.8 million and had originally cost $ 7 million. Sandown has recorded the disposal of the investment. The remaining available-for sale investments ( the $ 26.5 million in the trial balance) have a fair value of $ 29 million at 30 Sep 2009. The other reserve in the trial balance represents the net increase in the value of the available-for sale investments as at 1 Oct 2009. Ignore the deferred on these transactions.

    Your explanation is 26500+2500=29000 , Fair value so 2500 go to profit and loss.

    So in SOCI investment income (1300+2500=3800),

    In June 2013 q5, also say gain on investment property should go to profit and loss.

    But I look at acca answers, it looks different, it goes to other comprehensive income
    SOCI
    investment income 1300
    profit / gain on sale of available-for-sale-investments 4000

    Other comprehensive income 2500
    gain on available-for-sale investments (1800)

    acca explain: the profit reported on the sale of the available-for-sale investment has two parts:

    Gain in current year( 11000 proceeds-8800 carrying amount)=2200
    reclassified past revaluation gains ( from other equity reserve):
    (8800 carrying amount-7000 original cost) 1800
    2200+1800=4000
    The remaining investments of $26.5 million have a fair value of $29 million at 30 Sep 2009 which gives a fair value increase ( credited to other reserve) of $ 2.5 million.

    Is it because they treat available-for-sale investment still as own ppty , not investment property or it is dec 2009 exam, rule has changed since them?

    June 1, 2014 at 8:28 am #172274
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23309
    • ☆☆☆☆☆

    Just because an asset is classified as available-for-sale does not mean that is also classified as investment property. In fact, it’s almost the opposite! Investment property is held not for sale but for its revenue earning potential or capital appreciation whereas an available for sale item is certainly not being held for neither revenue earning nor capital gain.

    Yes, it’s still our property

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