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Which of the following statements is correct regarding investment properties?
(1) Transfers to or from investment property should only be made when there is a
change in their use.
(2) Transfers from an investment property to an IAS 16 property must be made at the
fair value of the investment property at the date of the transfer.
(3) An entity should treat any difference at the transfer date from a capitalised property
(treated under IAS 16) to an investment property as an expense to the profit or loss.
?? )Statement 1 only
?? )Both statements 1 and 2
?? )Both statements 2 and 3
??) Both statements 1 and 3how is the answer 2 option i.e. 1&2
i undertood why 1 is the answer but how is 2 the right answer since it was written in kaplan that transfer from investment property to PPE(IAS16) can be made at cost as well so howcome the 2nd option is right?
THE TEXT GIVEN IN KAPLAN
If an asset is transferred from investment property to property, plant and
equipment and the fair value model for investment property is used:
? Revalue the property first per IAS 40 (taking the gain or loss to the
statement of profit or loss) and then transfer to property, plant and
equipment at fair value
.
If the cost model is used for investment properties:
? The asset is transferred into property, plant and equipment at the current
carrying amount and continues to be depreciated.Hi,
2) is correct as the asset is measured under IAS 40,so to fair value with gains/losses through profit or loss, prior to being transferred to PPE under IAS 16.
3) is incorrect as when transferring from PPE under IAS 16 then we would revalue with gains going through OCI (reserves), they would not go through profit or loss.
Thanks
Cant the transfers from an investment property to an IAS 16 property must be made at the COST of the investment property at the date of the transfer? or is it necessary for it to be revalued to fair value?
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