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CFAS PAS 40 Q and A

The document defines investment property and provides examples of investment properties. It discusses when to recognize investment property and how to initially and subsequently measure it under both the cost and fair value models. Specific disclosure requirements are also provided for both measurement models.

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Joseph Andrei Bunado
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111 views2 pages

CFAS PAS 40 Q and A

The document defines investment property and provides examples of investment properties. It discusses when to recognize investment property and how to initially and subsequently measure it under both the cost and fair value models. Specific disclosure requirements are also provided for both measurement models.

Uploaded by

Joseph Andrei Bunado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

Define investment property


Answer: is property (land or a building—or part of a building— or both) held (by the
owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation
or both, rather than for:
a. use in the production or supply of goods or services or for administrative
purposes; or
b. sale in the ordinary course of business.

2. Give one example of an investment property


Possible Answer/s:
○ Land held for long term capital appreciation
○ Land held for currently undermined use
○ A building owned by the entity (or a right of use asset relating to a building held
by an entity) and leased out under one or more operating lease
○ A building that is vacant but is held to be leased out under one or more operating
lease
○ Property that is being constructed or developed for future use as investment
property

3. When to recognize investment property?


Answer:
a. it is probable that the future economic benefits that are associated with the investment
property will flow to the entity; and
a. the cost of the investment property can be measured reliably.

4. What are specific examples of the cost of investment property?


Answer: Cost of purchased investment property, cost of investment property under
deferred payments, cost of investment property acquired through exchange

5. How to initially measure investment property?


Answer: Investment property is measured initially at cost. Transaction cost shall be
included in its initial measurement.

6. How will the lessee measure investment property under the fair value model?
Answer: At the fair value of the right of use asset

7. Give two examples of items that must be carefully considered in determining the
carrying amount of investment property under the fair value model?
Possible Answers:
● Equipment such as lifts or air-conditioning is often an integral part of the building thus
included as fair value of the investment property rather than part of property, plant and
equipment account.
● If an office is on a furnished basis the fair value of the property includes the fair value of
the furniture also as income derived from these items also. It should not be separate
asset.
● The fair value excludes prepaid or accrued operating lease income, because the entity
recognizes it as a separate liability or asset.
● The fair value of investment property held by lessee as a right of use asset is the
expected cash flows and must add back any recognized lease liability (if a valuation
obtained for a property is net of all payments already)

8. How to compute the gain or loss on retirement or disposal of investment


property?
Answer: The difference between the net disposal proceeds and the carrying amount of
the asset
9. Provide one specific disclosure requirement on investment property measured
using the fair value model
Possible Answer/s:
● Additions, disclosing separately those additions resulting from acquisitions, those
resulting from business combinations, and those deriving from capitalized expenditures
subsequent to the property's initial recognition.
● Assets classified as held for sale, or included in a disposal group classified as held for
sale, in accordance with PFRS 5 and other disposals
● Net gains or losses from fair value adjustments.
● The net exchange differences, if any, arising from the translation of the financial
statements of a foreign entity
● Transfers to and from inventories and owner occupied property

10. Provide one specific disclosure requirement on investment property measured using the
cost model
Possible Answer/s:
● The depreciation method used
● The useful lives or the depreciation rates used
● The gross carrying amount and the accumulated depreciation (aggregated with
accumulated impairment losses) at the beginning and end of the period.
● A reconciliation of the carrying amount of investment property at the beginning and the
end of the period showing the following details:
■ I. Additions resulting from acquisitions, those resulting from business
combinations and those deriving from capitalized expenditures
subsequent to the property's initial recognition.
■ II. Disposals, depreciation, impairment losses recognized and reversed,
the net exchange differences, if any, arising from the translation of the
financial statements of a foreign entity, transfers to and from inventories
and owner occupied properties, and any other movements.

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