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128 Chapter 11 Investment Property (IAS 40) EXAMPLE: INVESTMENT PROPERTY EXAMPLE 11.1 Matchbox Inc. manufactures toys for boys. The following information relates to fixed property owned by the company: $’000 Land—Plot 181 Hatfi eld 800 Buildings thereon (acquired June 30, 20X0) 2,100 Improvements to the building to extend rented fl oor capacity 400 Repairs and maintenance to investment property for the year 50 Rentals received for the year 160 Approximately 6 percent of the property’s floor space is used as the administrative head office of the company. The property can be sold only as a complete unit. The remainder of the building is leased out under operating leases. The company provides lessees with security services. The company values investment property using the fair value model. On December 31, 20X0, the Statement of Financial Position date, Mr. Proper (an independent valuer) valued the property at $3.6 million. EXPLANATION To account for the property in the financial statements of Matchbox Inc. at December 31, 20X0, the property should first be classified as either investment property or owner-occupied property. It is classified as an investment property and is accounted for in terms of the fair value model in IAS 40. As the portions of the property cannot be sold separately the entire property must be assessed under IAS 40. The motivation for classifying the whole property as investment property is that the portion occupied by the company for administrative purposes (6 percent) is insignificant and the security services rendered to the lessees are also insignificant. Furthermore, the majority of the floor space is used to generate rental income. The accounting treatment and disclosure of the property in the financial statements of Matchbox Inc. are as follows: Statement of Financial Position at December 31, 20X0 Note $’000 Noncurrent Assets Property, plant, and equipment Xxx Investment property (Calculation a) 4 3,600 Accounting policies Investment property is property held to earn rentals. Investment property is measured at fair value with all changes in fair value recognized in profit or loss. The fair value is determined at the reporting date by an independent valuator based on market evidence of the most recent prices achieved in arm’s-length transactions of similar properties in the same area.
Chapter 11 Investment Property (IAS 40) 129 Notes to the Financial Statements Investment Property $’000 Opening balance – Additions 2,900 Improvements from subsequent expenditure 400 Net gain in fair value adjustments 300 Closing balance at fair value 3,600 Calculation a Carrying Amount of Investment Property $’000 Land 800 Building 2,100 Improvements to building 400 3,300 Fair value (3,600) Income (300) Increase in value shown in Statement of Comprehensive Income 300
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Covers all IASB standards through S
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International Financial Reporting S
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Contents Foreword: World Bank Treas
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Foreword: World Bank Treasury The p
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Acknowledgments The authors are gra
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xii Introduction 5. Presentation an
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CHAPTER 1 Framework for the Prepara
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Chapter 1 Framework for the Prepara
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CHAPTER 2 First-Time Adoption of IF
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Chapter 2 First-Time Adoption of IF
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Chapter 2 First-Time Adoption of IF
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CHAPTER 3 Presentation of Financial
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Chapter 3 Presentation of Financial
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38 Chapter 4 Statement of Cash Flow
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CHAPTER 5 Accounting Policies, Chan
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Chapter 5 Accounting Policies, Chan
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CHAPTER 6 Business Combinations (IF
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Chapter 6 Business Combinations (IF
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Page 124 and 125: 110 Chapter 10 Property, Plant, and
Page 138 and 139: 124 Chapter 11 Investment Property
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Page 145 and 146: CHAPTER 12 Agriculture (IAS 41) 12.
Page 147 and 148: Chapter 12 Agriculture (IAS 41) 133
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Page 158 and 159: 144 Chapter 13 Intangible Assets (I
Page 166 and 167: 152 Chapter 14 Leases (IAS 17) 14.3
Page 168 and 169: 154 Chapter 14 Leases (IAS 17) TABL
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Page 176 and 177: 162 Chapter 14 Leases (IAS 17) EXAM
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Page 180 and 181: 166 Chapter 14 Leases (IAS 17) EXPL
Page 183 and 184: CHAPTER 15 Income Taxes (IAS 12) 15
Page 185 and 186: Chapter 15 Income Taxes (IAS 12) 17
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Chapter 15 Income Taxes (IAS 12) 17
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Chapter 15 Income Taxes (IAS 12) 18
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184 Chapter 16 Inventories (IAS 2)
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CHAPTER 17 Financial Instruments: R
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Chapter 17 Financial Instruments: R
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CHAPTER 18 Financial Instruments (I
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Chapter 18 Financial Instruments (I
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Chapter 18 Financial Instruments (I
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CHAPTER 19 Noncurrent Assets Held f
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Chapter 19 Noncurrent Assets Held f
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CHAPTER 20 Exploration for and Eval
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Chapter 20 Exploration for and Eval
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240 Chapter 21 Provisions, Continge
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CHAPTER 22 The Effects of Changes i
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Chapter 22 The Effects of Changes i
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CHAPTER 23 Revenue (IAS 18) 23.1 OB
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Chapter 23 Revenue (IAS 18) 259 23.
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Chapter 23 Revenue (IAS 18) 261 23.
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Chapter 23 Revenue (IAS 18) 263 EXP
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CHAPTER 24 Construction Contracts (
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Chapter 24 Construction Contracts (
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276 Chapter 25 Employee Benefits (I
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288 Chapter 26 Impairment of Assets
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296 Chapter 27 Borrowing Costs (IAS
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304 Chapter 28 Accounting for Gover
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306 Chapter 28 Accounting for Gover
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CHAPTER 29 Share-Based Payment (IFR
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Chapter 29 Share-Based Payment (IFR
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CHAPTER 30 Events after the Reporti
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Chapter 30 Events after the Reporti
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CHAPTER 31 Related-Party Disclosure
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Chapter 31 Related-Party Disclosure
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CHAPTER 32 Earnings per Share (IAS
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Chapter 32 Earnings per Share (IAS
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CHAPTER 33 Financial Instruments: P
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Chapter 33 Financial Instruments: P
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Chapter 33 Financial Instruments: P
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CHAPTER 34 Financial Instruments: D
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Chapter 34 Financial Instruments: D
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392 Chapter 35 Operating Segments (
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400 Chapter 36 Interim Financial Re
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CHAPTER 37 Accounting and Reporting
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Chapter 37 Accounting and Reporting
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Chapter 37 Accounting and Reporting
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414 Chapter 38 Insurance Contracts
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428 Chapter 39 Financial Reporting
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434 About the Contributors Lufuno I
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“ The sixth edition of this publi
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