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this is continuation of my question in connection with
if a rival company ows us (my organisation) 100000 $. instead of it debt, it gives us its property of which fair value is 100 000$. do we recognise that property as a non current asset or investment property or we do not recognise it in the SOFP?
i want to note additionally that , for instance, we neither use that property in the course of business nor we dont rent it, just keep it as our property.you answered it depends on intention. i see. thank you. but you answered :
If it’s just going to be left empty and abandoned, we need to reconsider the valuation because it will rapidly lose its ‘fair’ valuein this case do we need to depreciate it?
No, depreciation is a method of matching the use / cost of an asset over its USEFUL life
It writes off the cost of the asset against the profits for the years during which the asset has been contributing to the profits for those years
So, no, no depreciation
However, we DO need to consider impairment
We need to consider the carrying value of the asset ($100,000) and compare that with the higher of value in use and net selling price
Now, if we’re not using it, then value in use is simply the present value of the future sales price and net selling price is …. simply the present value of the future sales price
And if the directors are not totally convinced that this property is going to be sold for not less than $100,000, then they should be considering impairing that asset
OK?
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