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Question) Which one of the following properties would classified as a investment property ?
a) Purchased land for investment potential.Planning permission has not been obtained for building construction of any kind.
b) A property that has been leased out under a finance lease
The answer key states (a) as the answer.
But in my textbook, the definition of investment property is ” a land or building (owned or held under a finance) held to earn rentals, capital appreciation or both , rather than for use in the entity or for sale in the ordinary course of the business.
Then by right option (b) is also a investment property right ?
If we rent OUT a property under a finance lease, it’s no longer (in accounting terms) ours
That definition that you quote refers to property that we have either bought outright or property that we have acquired under a finance lease, not property that we have leased out under a finance lease
In fact, the lessee that has acquired the property from us under a finance lease could treat that property as investment property
OK?
Ouh okay. I get it now. Which means only the lessee who has acquired the asset under the finance lease could treat it as a investment property, the lessor cannot. Thank you so much sir !
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