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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Investment property
Hi,
The following problem is from Kaplan:
Lavender owns a property, which it rents out to some of its employees.
The property was purchased for $30 million on 1 January 20X2 and
had a useful life of 30 years at that date. On 1 January 20X7 it had a
market value of $50 million and its remaining useful life remained
unchanged. Management wish to measure properties at fair value
where this is allowed by accounting standards.
In the solution, they say that “Property that is rented out to employees is deemed to be owner-occupied and therefore cannot be classified as investment property”. What is the logic here? If employees have rented the property for their personal use, why should not the entity recognise the asset as investment property?
If the employees have not rented for their personal use, why do they rent the asset at all?
Thanks
Grey area. If the employees are given SUBSIDISED rentals – then I would go for PPE.
But is paying full market rent, more likely to be IP.
On balance, I would assume the employees get subsidised rent.
