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PPE to investment property

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › PPE to investment property

  • This topic has 4 replies, 2 voices, and was last updated 4 months ago by sooha.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • February 25, 2022 at 8:40 am #649311
    sooha
    • Topics: 22
    • Replies: 23
    • ☆

    Speculate owns two properties and uses fair value accounting where possible.
    Property A: An office building used by Speculate for administrative purposes. At 1 April 20X2 it
    had a carrying amount of $2 million and a remaining life of 20 years. On 1 October 20X2, the
    property was let to a third party and reclassified as an investment property. The property had a
    fair value of $2.3 million at 1 October 20X2, and $2.34 million at 31 March 20X3.

    What would the carrying amount of Property A be at 31 March 20X3 if Speculate used the
    cost model for investment properties?

    the answer as per kaplan is $1,900,000

    as i know when property transferred to investment should finish the procedure of PPE up to date of transfer then revalued the asset regardless the model adopted after that hold under investment property as cost or fair value ?
    that mean the asset will be 2.3 m at the date of transferred regardless the method adopted ? isn’t ?
    why here ignored the fair value and depreciated over all 12 months ? kindly help

    February 26, 2022 at 12:39 pm #649390
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    Your understanding is correct if the PPE was help under the revaluation model but it isn’t so it would be treated as normal under IAS 16, so depreciated. Given that it is then held under the cost model for IAS 40 it would then continue to be depreciated.

    Thanks

    February 26, 2022 at 7:12 pm #649404
    sooha
    • Topics: 22
    • Replies: 23
    • ☆

    thank you so much
    but it is mentioned in the study text of ( kaplan and Bpp) – regardless of the model that PPE held should revalued before transfer to investment

    February 27, 2022 at 10:37 am #649443
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    But…….when an entity uses the cost model for investment property, transfers between categories do not change the carrying amount of the property transferred, and they do not change the cost of the property for measurement or disclosure purposes.

    Thanks

    February 27, 2022 at 7:40 pm #649474
    sooha
    • Topics: 22
    • Replies: 23
    • ☆

    oh – i see it makes sense
    i got it now thank you ^^

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