Investment property

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January 24, 2017 at 9:18 am #369238
Anuja Nair
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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 ?
January 24, 2017 at 10:25 am #369246
MikeLittle
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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?
January 25, 2017 at 1:29 am #369394
Anuja Nair
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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 !
January 25, 2017 at 6:17 am #369401
MikeLittle
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You’re welcome
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