CAF-1 · Chapter 4 · Question 2 of 15
Sigma Real Estate uses the fair value model for its investment properties. At year-end, the fair value of its commercial plaza increased by Rs. 8 million. How should this increase be treated in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Recognized as a gain in the statement of profit or loss for the period.
Explanation
Unlike IAS 16 where revaluation gains go to OCI, under the IAS 40 Fair Value Model, any gain or loss arising from a change in the fair value of an investment property is recognized directly in profit or loss for the period in which it arises.
More IAS 40 Investment Property MCQs
- Q4Which of the following properties is classified as an investment property under IAS 40?
- Q5If a company owns a building and leases it out to an independent third party under an operating lease, how is it classified?
- Q6How should an entity account for a property that has both an investment property portion and an owner-occupied portion, if the portions…
- Q7Under IAS 40, which of the following of the following costs should NOT be included in the initial cost of an investment property?
- Q8Under the fair value model for investment property, how are changes in fair value treated?