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Question sep/dec 2015 BUBBLE
In the answer sheet (w10);overseas property, how did the answer obtajn 7m for the building ?
In the 3rd double entry 7m/35m x 6/12
7m is the market value of the land but the answer have used 7m again for the building… so im abit confused, how did the question get 7m again ? And where it came from
Thank you !
Copied from ACCA’s model answer:
The transaction has commercial substance and so the cost of the property acquired should be measured at the fair value of the asset given up. The fair value of the asset given up can be reliably measured using IFRS 13 principles and so the property should have been recorded at $7m rather than $5m. A profit on disposal should have arisen of $2m which will need to be credited to retained earnings. The $0·5m spent on staff relocation is not directly attributable to the property and so should have been expensed. Depreciation should be charged of $7m/35 x 6/12 = $100,000. This would leave a carrying amount before revaluation at 31 October 2015 of $6·9m. The fair value at this date is 75m dinars/9·5 = $7·9m. A revaluation gain should be recorded in other components of equity of $1m.
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