Fair value model

Hello Mr chris,

How are you,

Why in the following investment question the depreciation and cost to sell are ignored ,

Thanks,

Croft acquired a building with a 40?year life for its investment potential for $8 million on 1
January 20X3 At 31 December 20X3, the fair value of the property was estimated at $9 million
with costs to sell estimated at $200,000.
If Croft Co uses the fair value model for investment properties, what gain should be
recorded in the statement of profit or loss for the year ended 31 December 20X3?
$_______________ ,000

answer

1,000,000
The fair value gain of $1 million ($9m – $8m) should be taken to the statement of profit or
loss. Costs to sell are ignored and, since Croft uses the fair value model, no depreciation will
be charged on the building.