Why is IAS 36 Impairment of Asset not applied to an investment property measured under the fair value model in accordance with IAS 40 Investment Properties?
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Why is IAS 36 Impairment of Asset not applied to an investment property measured under the fair value model in accordance with IAS 40 Investment Properties?
Provide answers to the questions raised by the finance assistant in accordance with relevant accounting standards.
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- Under IFRS, which of the following statements describes the fair value model for accounting for investment properties? Question 12 options: a) All investment properties are remeasured at fair value at each reporting date. b) Depreciation is recorded over the investment property’s useful life. c) Gains or losses arising from changes in fair value are recognized in other comprehensive income in the period in which they arise. d) Accumulated gains and losses are recognized in profit or loss in the period in which the investment property is derecognized.Which one of the following is not true concerning the treatment of investment properties under LKAS 40? Select one: a. If an investment property is held at fair value, this must be applied to all of the entity's investment property. b. A gain or loss arising from a change in the fair value of an investment property should be recognized in other comprehensive income c. Following initial recognition, investment property can be held at either cost or fair value d. An investment property is initially measured at cost, including transaction costs.Which one of the following is not true concerning the treatment of investment properties under IAS 40? A Following initial recognition, investment property can be held at either cost or fair value. B If an investment property is held at fair value, this must be applied to all of the entity's investment property. C An investment property is initially measured at cost, including transaction costs. D A gain or loss arising from a change in the fair value of an investment property should be recognised in other comprehensive income.
- 1. When reclassification is made from owner occupied property to investment property that will be carried at fair value, any excess of the fair value over the carrying amount at the date of transfer is a. ignored. b. recognized as a gain in profit or loss, c. credited to asset revaluation surplus. d. recorded as a credit to a liability account2. Which of the following are valid statements regarding measurement of investment property? I. The best evidence of fair value is current price in an active market for similar property in the same location and condition.II. When items of investment property are measured at fair values, any movement in fair value is credited to other comprehensive income under the heading revaluation surplus.III. An entity shall continue to measure an investment property at fair value until its disposal if it has previously valued the property at fair value.IV. Transaction costs directly attributable to acquisition of investment property are capitalized as…The objective of the HRA is to______ a. provide a determination of asset control as to whether human assets are conserved, developed or depreciated b. aid in the development of management principles by classifying the assets and liabilities of the organization for tax purpose c. None of the given options are correct d. Both the given options are correctUnder IAS 36 Impairment of Assets, impairment test for an individual asset requires that the carrying amount of the asset be compared to its recoverable amount. According to IAS 36, ‘recoverable amount’ is defined as the higher of two items. Which one of the following correctly describes these two items? a. present value of future cash flows from the asset and fair value of asset less costs of disposal b. future cash flows from the asset and fair value of asset less costs of disposal c. future cash flows from the asset and fair value of asset d. present value of future cash flows from the asset and fair value of the asset
- In accordance with IAS 36 Impairment of Assets, which one of the following is an indicator that an asset may be impaired? a. evidence that the asset is physically damaged b. a fall in interest rates that materially affects the asset’s value in use c. the market capitalisation of the entity is greater than the carrying amount of its net assets d. a decline in the asset’s market value, as would be expected from normal use1. When an item of asset is transferred to and from the classification investment property, carried using the cost model, the measurement basis at the date of transfer is the a. original cost. b. fair value. c. carrying amount. d. recoverable amount.2. What could be a valid reason for transfers from investment property to property, plant and equipment? a. When there is a change in use b. based on the accountant's discretion c. When the entity adopts the fair value model d. when there is change in asset's life3. An entity has an investment property that is held for rental income. The entity uses the fair value model for reporting the investment property. Which of the following statement is true? a. changes in fair value are reported in profit or loss in the current period b. changes in fair value are reported as an extraordinary gain c. changes in fair value are reported in other comprehensive income for the period d. changes in fair value are…1. On derecognition of a financial asset , the difference between the consideration received and the carrying amount of the financial asset shall be: 2 points a. Recognized in other comprehensive income for financial asset at amortized cost and profit or loss for financial asset at fair value. b. Recognized in profit or loss only for financial asset measured at amortized cost. c. Recognized in profit or loss only for financial asset measured at fair value. d. Recognized in profit or loss for both financial asset at fair value and financial asset at amortized cost. 2. The entity purchased government bonds. The entity’s business model in managing financial assets is to collect contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. Which of the following is the most appropriate classification for the investment in bonds? 2 points a. At fair value through profit or loss. b. At amortized cost.…
- 1. On derecognition of a financial asset , the difference between the consideration received and the carrying amount of the financial asset shall be: 2 points a. Recognized in other comprehensive income for financial asset at amortized cost and profit or loss for financial asset at fair value. b. Recognized in profit or loss only for financial asset measured at amortized cost. c. Recognized in profit or loss only for financial asset measured at fair value. d. Recognized in profit or loss for both financial asset at fair value and financial asset at amortized cost. 2. The entity purchased government bonds. The entity’s business model in managing financial assets is to collect contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. Which of the following is the most appropriate classification for the investment in bonds? 2 points a. At fair value through profit or loss. b. At amortized cost.…Transfers from investment property to property, plant and equipment are appropriate a. The entity can never transfer property into another classification on the balance sheet Once it is classified as investment property. b. When there is change of use. c. Only when the entity adopts the fair value model under IAS 38. d. Based on the entity’s discretion.14 A government entity accounts for transfers to or from investment property at cost, no gain or loss shall arise from the transfer except when an asset is impaired. Group of answer choices True False