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Dear Tutor,
i have confused in IAS40 about increasing/decreasing in fair value model.
first problem:
when investment property changed from cost model to fair value model, assume that there is a credit to a surplus revaluation account.
year later, the fair value is increased ( this increasing is a credit in SPL).
after that, the fair value is decreased, so the loss is a debit to surplus revaluation account and the excess is an expense in SPL, or the whole decreasing is an expense in SPL, and surplus revaluation account is remained as before?
second problem:
when investment property changed from cost model to fair value model, assume that there is a credit to a surplus revaluation account.
year later, the fair value is decreased, so the loss is a debit to surplus revaluation account and the excess is an expense in SPL, or the whole decreasing is an expense in SPL, and surplus revaluation account is remained as before
thank in advance.
I don’t recollect ever having come across such an issue before!
This extract from the IASPLUS site should clear it up for you – it looks pretty unequivocal to me:
“Fair value model
Investment property is remeasured at fair value, which is the amount for which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction. [IAS 40.5] Gains or losses arising from changes in the fair value of investment property must be included in net profit or loss for the period in which it arises. [IAS 40.35]”
This appears to apply whether the property was acquired as an investment property or whether it was a re-classified owner-occupied property
In summary, I’m going to say that all gains and losses go through SoPorL
OK?
thank for your answer, now i got it, but i have another question.
when disposal an investment property that transferred from owner-occupied property with a surplus revaluation.
how to treat with that surplus revaluation (transfer to retained earning or remain surplus revaluation account)?
thank in advance.
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