Page 26 - 3. COMPILER QB - INDAS 16

2. Property ‘3’
Definition and applicability:
As per Ind AS 40, Investment property is property held to earn rentals or for capital appreciation or both,

rather than for:
- Use in the production of goods or services or for administrative purposes; or
- Sale in the ordinary course of business.
Therefore, property 3 is an investment property and company shall follow cost model for its subsequent

measurement.

Accounting Principles:

- An entity shall adopt as its accounting policy the cost model to all of its investment property; and
(Refer paragraph 30 of Ind AS 40)
- requires that an entity shall disclose the fair value of investment property. (Refer paragraph 79 (e) of
Ind AS 40

Further, paragraph 54 (2) of Ind AS 1 ―Presentation of Financial Statements‖ requires that as a
minimum, the balance sheet shall include line items that present the following amounts:
a. Property, Plant and Equipment
b. Investment Property.

Analysis:

As per the facts given in the question, Special Ltd. has
a. Presented all three properties in balance sheet as ―property, plant and equipment‖;
b. Not charged depreciation to Property ―1‖ and ―3‖;
c. Upward revaluation is recognised in the statement of profit and loss as profit; and
d. Applied revaluation model to Property ―3‖ being classified as Investment

Property.
The above accounting treatment is neither correct nor in accordance with provision of Ind AS 1, Ind AS 16
and Ind AS 40.
Accordingly, Special Ltd. shall depreciate Property 1 irrespective of the fact that, their fair value exceeds
the carrying amount. The revaluation gain shall be recognised in other comprehensive income and

accumulated in equity under the heading of revaluation surplus.
There is no alternative of revaluation model in respect to property ―3‖ being classified as Investment
Property and only cost model is permitted for subsequent measurement. However, Special Ltd. is required
to disclose the fair value of the property in the Notes to Accounts. Further, Property ―3‖ shall be

presented as separate line item as Investment Property and depreciation should be charged on it as well.
Therefore, as per the provisions of Ind AS 1, Ind AS 16 and Ind AS 40, the presentation of these three
properties in the balance sheet will be as follows:
Balance Sheet (extracts) as at 31st March, 2021
Assets Rs.
Non-Current Assets
Property, Plant and Equipment

Property ―1‖ 8,00,000
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