- 2 Marks
CR – May 2021 – L3 – Q4c – Fair Value Measurement (IFRS 13)
Advise on measuring the fair value of land for residential purposes in financial statements.
Question
Kantala Limited is a company based in Abeokuta, the Ogun State capital. It uses the revaluation model for its non-current assets. Kantala Limited has several plots of farmland which are unproductive.
The company feels that the land would have more value if it were used for residential purposes.
There are several potential purchasers for the land, but planning permission has not yet been granted by the Abeokuta Planning Authority for use of the land for residential purposes.
However, preliminary enquiries with the planning authority seem to indicate that the planning permission may be granted. Additionally, the Ogun State Government has recently indicated that some agricultural land should be used for residential purposes.
Required:
Advise Kantala Limited on how to measure the fair value of the land in its financial statements. (2 Marks)
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