Page 5 - 5. COMPILER QB - INDAS 40

Less: Direct operating expenses generating rental income
(5+1+2.5+1.5+2+1) (0.13)
Profit from investment properties before depreciation and
indirect expenses 0.87
Less: Depreciation (0.55)
Profit from earnings from investment properties before
indirect expenses 0.32

Disclosure Note on Investment Properties acquired by the entity
st
The investment properties consist Property A and Property B. As at 31 March, 2020, the fair value of the

properties is Rs.10.50 crore. The valuation is performed by independent valuers, who are specialists in valuing
investment properties. A valuation model as recommended by the International Valuation Standards
Committee has been applied. The Company considers factors like management intention, terms of rental

agreements, area leased out, life of the assets etc. to determine classification of assets as investment
properties.
The Company has no restrictions on the realisability of its investment properties and no contractual
obligations to purchase, construct or develop investment properties or for repairs, maintenance and
enhancements.

Description of valuation techniques used and key inputs to valuation on investment properties:
Valuation Significant unobservable inputs Range (Weighted
technique average)
Discounted - Estimated rental value per sq. - Rs. 50 to Rs. 60
cash flow ft. per month
(DCF) - Rent growth per annum - 10% every 3 years
method - Discount rate - 12% to 13%

Q3 (May. 21)
X Ltd owned a land property whose future use was not determined as at 31 March 20X1. How should the

property be classified in the books of X Ltd as at 31 March 20X1?
During June 20X1, X Ltd commenced construction of an office building on it for its own use. Presuming that
the construction of the office building will still be in progress as at 31 March 20X2
a) How should the land property be classified by X Ltd in its financial statements as at 31 March 20X2?

b) Will there be a change in the carrying amount of the property resulting from any change in use of the
investment property?
c) Whether the change in classification to, or from, investment properties is a change in accounting policy to
be accounted for in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and
Errors?
d) Would your answer to (a) above be different if there were to be a management intention to commence

construction of an office building for own use; however, no construction activity was planned by 31 March
20X2?

5. 4