IAS 16 and IAS 40(International Accounting Standards)

Finance & Accounting
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Name: Tutor: Course: Date: University: (a) How will Gale plc determine whether the building is an investment property or not? As per the presented information, it is hard to determine whether the building is an investment property. This is due to the fact that, according to the definition presented by IAS 40 in iasplus.com website, an investment property refers to such property that includes buildings and land or part of such that is either held by the legal owner or lessee for the purpose of earning rentals or for the reasons of achieving appreciation of capital or even both.


Therefore, owner occupied property that is being held for future disposal does not really fall under investment properties. (iasplu.com, 2011) (b) After initial recognition, describe the accounting treatment that should be adopted for a building in accordance with IAS16, assuming it is not an investment property? IAS 16, as Holt writes, deals with (PPE) Plant, Property and Equipment. The definition put across by IAS 16 with regards to Plant, Property and Equipment is any tangible type of asset which any given entity may hold for rental purposes or for own use and which the same entity expects to utilise for more than a period. This PPE could have been either constructed or bought by the reporting entity. Any item falling under PPE has to be recognised by the reporting entity as an asset. In case the future benefits as well as losses that are expected from the asset can be reasonably quantified, then the item of PPE should be taken in the books of the entity as an asset. ...
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