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Hi,
This is because the entity’s surplus cash has been used to buy property as opposed to say investing in shares. Changes in share price held under the default FVTPL are recognised through profit or loss and not depreciated. Therefore in order to match the treatment od two similar items, i.e. the IP and shares then the IP is not depreciated.
Thanks
If lessor gives property on operating lease to the lessee, then in the books of a lessor this property will be treated under IAS 16 or IAS 40 ? Please clarify
Thanks
Hi,
If we are the lessor and lease it out under an operating lease then we still have the risks and rewards of the asset and it will be shown in our books. As we are renting the property out and not using it ourselves then it is held for investment purposes, and so would be treated under IAS 40.
Thanks
Hi Tutor,
Thanks for the reply. That means we will not depreciate the property which were given on operating lease ? Also we will record the changes to the F.V of those property to P&L directly instead of OCI.?
I have seen some cases where management has given property on operating lease but still depreciating those property and change in value being recorded in OCI?
Please clarify this confusion.
Hi,
Yes, if we hold the property as the lessor under an operating lease then it is not depreciated and the change in fair value goes through profit or loss.
You’d have to point me in the direction of where you’ve seen depreciation charged and changes in value going through OCI as it isn’t something that I’ve seen before for property.
Thanks
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