- January 12, 2022 at 4:20 pm #645779hm1995Participant
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- Replies: 11
I would like to understand why does a gain on fair value model of investment property go to profit and loss straight and not to revaluation surplus? As its a gain which hasnt realised, and so when we put a gain to P/L account arent we considering as realised? I dont understand the logic behind it.January 13, 2022 at 12:04 pm #645861mrjonbainModerator
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If you think about other assets to which revaluation could be applied this may make it easier to understand. Let’s say for instance a building owned by company that couldn’t be classified as an investment property. In this case depreciation would be charged on this asset at revalued amount over remaining useful life. In a sense the standard on investment property exists to avoid “punishing” companies for holding investment properties. Investment properties are viewed as a different category of asset. You are correct in the sense that the gain on investment properties would not be seen as realised in legal terms and would not be considered distributable to shareholders in most jurisdictions. Hope this helps.
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