IAS 40 Investment property — OpenTuition Forums

Uunaiza10y ago

This is an Examples taken from bpp text. Investment property C) a building held by a parent and leased to a subsidiary. Note, however, that while this is regarded as an investment property in the individual parent company financial statements in the consolidated financial statements this property will be regarded as owner occupied (because it is occupied by the group) and will therefore be treated in accordance with IAS16. My question is in IAS 17 Lease I have read it that a lessor will not write it as a non current asset in his accounts rather as he would be receiving money therefore will write as receivable. On the other hand leasee will account it as a non current asset. So here in the above example parent company is a lessor and subsidiary is a leasee. So why it would be regarded as an investment property in the individual parent company financial statements.

MikeLittleTutor10y ago#1

Because, so far as the individual parent entity is concerned, it's an investment property! It's only when we get to consolidate that we view the group as a single entity

Uunaiza10y ago#2

I got your point concerning the treatment for group accounts and as a single entity but what about this in IAS 17 LEASE topic in bpp I have read it that a lessor will not write it as a non current asset in his accounts rather as he would be receiving money therefore will write as receivable. On the other hand leasee will account it as a non current asset. So here in the above example parent company is a lessor and subsidiary is a leasee. So why it would be regarded as an investment property in the individual parent company financial statements.

MikeLittleTutor10y ago#3

If the owner were to acquire a property as an investment and rent out office space as a landlord, that would be investment property If that same owner were instead to acquire a property as an investment and lease it out under a finance lease - for the whole or substantially the whole of the asset's estimated useful life - then it would no longer be classed as a long-term asset but would instead be treated as a receivable We can't have 2 entities treating the SAME property as an asset! On consolidation, the obligation in the lessee's financial statements will cancel against the receivable in the lessor's records. That will leave the asset in the statement of financial position of the lessee and ready for incorporation into the consolidated financial statements Ok now?

Uunaiza10y ago#4

Ok thanks

MikeLittleTutor10y ago#5

You're welcome

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