- 10 Marks
FR – Nov 2015 – L2 – Q7b – Fair Value Measurement (IFRS 13)
Explaining accounting treatment for investment property and calculating values for the financial statements.
Question
KOLA NITDA Nigeria Plc is a company engaged in the manufacturing of hand sanitizer to prevent Ebola disease. The following information relates to property owned by the company:
| N’000 |
|---|
| Land – Plot 404 Apapa Industrial Area |
| Building therein (acquired June 30, 2013) |
| Improvement to the building to extend rented floor capacity |
| Repairs and maintenance to investment property for the year |
| Rental received for the year |
Approximately six percent of the property 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, 2014, which is the company’s year-end. Tewogbade & Co. (an independent valuer) valued the property at N144,000,000 on that date.
Required:
i. Advise the Directors of KOLA NITDA Nigeria Plc on how the property should be treated in the financial statements of the company as at December 31, 2014 in order to ensure strict compliance with provisions of IAS 40. (5 Marks)
ii. Calculate the value of investment property that should be disclosed in the statement of financial position as at December 31, 2014 and the amount that should be charged to the statement of profit or loss and other comprehensive income for the period then ended. (5 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Fair Value, IAS 40, Investment Property, Property Accounting, Revaluation Model, Valuation
- Level: Level 2
- Topic: Fair Value Measurement (IFRS 13)
- Series: NOV 2015