Beruflich Dokumente
Kultur Dokumente
Adj A/Prof Tan Yee Peng Email tanyp@ntu.edu.sg Mobile 8138 8318
Agenda
1. What is an investment property?
2. How to measure an investment property? 3. How to account for gain/loss on disposal? 4. How to account for transfers in or out of investment property?
Uses of property
Capital appreciation
FRS 16 PPE
FRS 16 PPE
FRS 2 Inventories
Investment property is property held to earn rental income or for capital appreciation, or both, rather than for: use in the production or supply of goods or services or for administrative purposes; or sale in the ordinary course of business
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Refresh
Inventories Assets held for sale in the ordinary course of business, in the process of production for such sale, or materials or supplies to be consumed in the production process or in the rendering of services Property, plant and equipment Tangible items (a) held for use in production/supply of goods/services, for rental to others, or for administrative purposes (b) expected to use for > 1 period
Under the revaluation model, how often must PPE be revalued? 1. At least once in every financial period 2. Only every 3 to 5 years 3. As & when management desires 4. As & when requested by external auditors 5. Sufficiently regular so that carrying amount does not differ significantly from its FV
Property held for investment purposes can also be accounted for under FRS 16
1. True
2. False
Purpose 1. Production or supply* 2. Administrative purposes* 3. Rental to others 4. Capital appreciation 5. Sale in ordinary business
*Owner-occupied
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Investment property
In this instance, FRS 40 overrides FRS 17 by requiring that the lease be accounted for as if it were a finance lease.
Are you able to split the property? Can the portion be sold or leased out separately under a finance lease?
If yes, account for each portion under the relevant accounting standard If no, the entire property is classified as investment property only if the portion held for own use is insignificant
Own use
Owner occupied
Rental income
rental income
FRS 40
FRS 16
FRS 40
owner occupied
rental income
FRS 16
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Ancillary services
services
rental income
FRS 40
services
rental income
FRS 16
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Agenda
1. What is an investment property?
2. How to measure an investment property? 3. How to account for gain/loss on disposal? 4. How to account for transfers in or out of investment property?
Investment Property
Initial recognition
Cost model
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Investors expectations
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Independent professional valuers valuation is encouraged but not required (FRS 40:32)
If FV cannot be measured reliably for IP, measure at cost in accordance with FRS 16 (FRS 40:53) Once FV always FV (FRS 40:55) until disposal or change of use
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16
Agenda
1. What is an investment property?
2. How to measure an investment property? 3. How to account for gain/loss on disposal? 4. How to account for transfers in or out of investment property?
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Agenda
1. What is an investment property?
2. How to measure an investment property? 3. How to account for gain/loss on disposal? 4. How to account for transfers in or out of investment property?
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Measurement of transfers
From Investment property
-Cost model -Fair value model
Investment property
-Cost model -Fair value model
Inventories
Investment property
Inventories
Investment property
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Inventory (FRS 2)
Revaluation in OCI
OCI = other comprehensive income
Investment property at fair value Commencement of owner occupation Commencement of development with a view to sale
Inventory (FRS 2)
Under FRS 40, transfers to or from investment property shall be made when there is a change in use, evidenced by (i) commencement of owner-occupation, for a transfer from investment property to owner-occupied property (ii) commencement of development with a view to sale, for a transfer from investment property to inventories (iii) end of owner-occupation, for a transfer from owner-occupied property to investment property (iv) commencement of an operating lease to another party, for a transfer from inventories to investment property a. b. c. d. e. (i) and (ii) (i) and (iii) (i), (ii) and (iii) All of the above None of the above
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Due to a government clampdown on the overheated property market, Prosperous Ltd, a property developer, decides to rent out some of its completed apartments through operating lease agreements with external parties instead of selling them. Prosperous Ltd uses the fair value model under FRS 40 to account for its investment property. Which one of the following statements below is correct?
a. The above represents a transfer from Plant, Property and Equipment (FRS 16) to Investment Property (FRS 40) Upon the transfer, the difference between the fair value and carrying amount of the apartments will go to Profit & Loss. Upon the transfer, the difference between the fair value and carrying amount of the apartments will go to Revaluation Reserve. The carrying amount of the apartments will be transferred to an Investment Property account upon the signing of the lease agreements. The transfer is just a reclassification of assets and as such there are no valuation issues.
b.
c. d. e.
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Agenda
1. What is an investment property?
2. How to measure an investment property? 3. How to account for gain/loss on disposal? 4. How to account for transfers in or out of investment property?
Inventories (FRS 2) Assets arising from construction contracts (FRS 11) Deferred tax assets (FRS 12) Financial assets (FRS 39) other than investments in subsidiaries, associates and jointly controlled entities Assets arising from employee benefits (FRS 19) Investment property measured at fair value (FRS 40) Biological assets measured at fair value less estimated point-of-sale costs (FRS 41) Assets arising from insurance contracts (FRS 104) Non-current assets classified as held for sale (FRS 105)
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Reversal of impairment
Cost Method
Property nature
PPE or IP
PPE
IP
Applicable FRS
FRS 16 / FRS 40
FRS 16
FRS 40
Depreciable?
N.A.
Yes
Yes