Week 2 IP.pptx - INVESTMENT PROPERTY Puteh Mariam Ismail...

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INVESTMENT PROPERTY Puteh Mariam Ismail
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Definition Investment property is property (land or building) held (by the owner or lessee under a finance lease agreement) to earn rentals or for capital appreciation or both, rather than to: i) Use in the production or supply of goods or services or for administrative purposes, or ii) Sale in the ordinary course of business.
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Recognition IP can be recognized or accounted in the financial statement i.e. SOFP when: It satisfied the IP definition It is probable that the future economic benefits will flow to the entity Cost can be measured reliably
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Initial Measurement Any IP should be first measured at its cost + any transaction cost for it to be ready for intended use and location = IAS 16. The initial cost for property under lease (FL or OL) should be at lower between: Its FV or It present value of minimum lease payment (PVMLP).
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Subsequent Measurement IAS allows 2 methods to account or measure IP, which are: The Fair Value (FV) model - taken at its FV at each assessment period with no depreciation or impairment. Cost model – as IAS 16, taken at historical cost – depreciation – impairment. The chosen method should be applied on the whole IP.
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Cost model Alternatives for entity if FV can’t be established or to avoid volatility in financial statements. The measurement will be at its HC – any depreciation – any impairment. All principles under IAS 16 applies.
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Fair value model Only applicable if the FV can be established according to IFRS 13 if failed apply IAS 16 cost model. The FV at assessment period i.e. normally at YE will be used as the new value.
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