Topic 2 - Investment Property - Investment Properties...

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1 Learning Outcomes: Understand the nature & types of investment properties Understand the bases of measurement and income recognition for these assets Understand the disclosure requirements relating to the investments properties Investment Properties 1
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Investment Properties (IP) MFRS 140: Definition Property held to earn rentals or capital appreciation or both , rather than: use in production or supply of goods or services or for administrative purpose [owner-occupied property]; or sale - generates cash flows largely independently of other assets held Examples: land held for appreciation a building owned and leased out under operating lease vacant building and held for leasing under operating lease 2
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Cont. Examples of properties that are not IP: property held for sale [Inventories : MFRS 102] property constructed / developed on behalf of 3 rd party [Construction : MFRS 111] owner-occupied property : OOP [PP&E : MFRS 116] property being constructed / developed for future use as investment property [PP&E :MFRS 116, until completion] Property leased to another entity under finance lease 3
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Cont. What happen if a portion is held to earn rentals/capital appreciation & another portion is held for use in the business ? Guidance from MFRS 140: If the portions could be sold separately – A portion as IP & another portion as PPE If the portion could NOT be sold separately qualifies as IP only if an insignificant portion is held for use in business 4
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Cont. Example : SPK Bhd acquires a 10-storey building in Kuala Lumpur. Four storeys of the building are occupied by SPK Bhd’s management for administrative purposes. The remaining six storeys are let out to tenants. The cost of the property is RM200 million. Required: Explain how SPK shall account for purchased building . 5
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Cont. Transactions between Group: In some cases, an entity owns property that is leased to, and occupied by, its parent or another subsidiary .
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