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Hi! I hope you’re doing well.
I’ve a question from FR practice questions.Load Plc, a building entity that also manufactures building materials, has 4 properties and wishes to know whether they should be treated as investment properties.
The third floor of an office building leased to Load plc’s subsidiary. The fifteen storey building is owned by Load Plc and the third floor had been unoccupied for many years
—>I was wondering why this is not treated as investment properties?Hi,
I’m well, thanks. Hope you are too!
The building itself would not be IP as 14 out of the 15 floors are used for administrative purposes, so treated as PPE under IAS 16. The floor that is leased out could be separated out and treated as IP in the individual company accounts of Load if it could be sold separately or leased out under a finance lease but given that it hasn’t been occupied recently would suggest that this isn’t the case, so all treated as PPE and not IP.
Thanks
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