Page 2 - 5. COMPILER QB - INDAS 40
P. 2
INDAS – 40
INVESTMENT PROPERTY
(TOTAL NO. OF QUESTIONS – 7)
INDEX
S.No. Particulars Page No.
1 RTP Questions 5.1
2 MTP Questions 5.6
3 Past Exam Questions 5.8
4 Newly Added Questions by ICAI 5.12
RTPs QUESTIONS
Q1 (MAY 18)
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X Ltd. is engaged in the construction industry and prepares its financial statements up to 31 March each
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year. On 1 April, 2013, X Ltd. purchased a large property (consisting of land) for Rs. 2,00,00,000 and
immediately began to lease the property to Y Ltd. on an operating lease. Annual rentals were Rs. 20,00,000.
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On 31 March, 2017, the fair value of the property was Rs. 2,60,00,000. Under the terms of the lease, Y Ltd.
was able to cancel the lease by giving six months’ notice in writing to X Ltd. Y Ltd. gave this notice on
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31 March, 2017 and vacated the property on 30 September, 2017. On 30 September, 2017, the fair value of
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the property was Rs. 2,90,00,000. On 1 October, 2017, X Ltd. immediately began to convert the property into
ten separate flats of equal size which X Ltd. intended to sell in the ordinary course of its business. X Ltd.
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spent a total of Rs. 60,00,000 on this conversion project between 30 September, 2017 to 31 March, 2018. The
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project was incomplete at 31 March, 2018 and the directors of X Ltd. estimate that they need to spend a
further Rs. 40,00,000 to complete the project, after which each flat could be sold for Rs. 50,00,000.
Examine and show how the three events would be reported in the financial statements of X Ltd. for the year
ended 31 March, 2018. as per Ind AS
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SOLUTION
From 1st April, 20X1, the property would be regarded as an investment property since it is being held for its
investment potential rather than being owner occupied or developed for sale.
5. 1