CHAPTER 26

SMEs - ASSETS
Inventories
Basic financial instruments
Investment in associate
Investment property

TECHNICAL KNOWLEDGE

To know the measurement of inventory of an SME.

To identify specific basic financial instruments.

To know the initial and subsequent measurement of basic financial

instruments.
To know the measurement of investment in associate of an SME

To know the initial and subsequent measurement of investment property of an

SME.

INVENTORIES
Inventories are assets held for sale in the ordinary course of business, in the
process of production for such sale, or in the form of materials or supplies to
be consumed in the production process or in the rendering of services.
Measurement of inventories
An SME shall measure inventories at the lower of cost and estimated selling
price less cost to complete and dispose.
This approach is the equivalent of the measurement of Inventories at the
lower of cost and net realizable value or LCNRV under full PFRS.
If the estimated selling price less cost to complete and dispose is lower than
cost, the inventory is deemed impaired.
Accordingly, an impairment loss shall be recognized.
The cost of inventories shall include all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location
and condition.
Comparison with full PFRS
The PFRS for SMEs and full PFRS have practically the same provisions
related to definition, measurement, costs of purchase, costs of conversion,
other costs and cost formulas for inventories.
The main difference is the recognition of the loss on inventory writedown.
Under PFRS for SMEs, the excess of the carrying amount over the selling
price less cost to complete and dispose shall be recognized as impairment
loss.
However, under full PFRS, the loss on inventory writedown is a component of
cost of goods sold rather than an impairment loss.
Recognition of inventories as expense
When inventories are sold, the carrying amount of the inventories shall be
recognized as expense as component of cost of goods sold in the period in
which the related sales revenue is recognized.

BASIC FINANCIAL INSTRUMENTS

Under PFRS for SMEs, examples of basic financial instruments are:
1. Cash
2. Demand and fixed term deposits or bank accounts
3. Trade accounts receivable, notes receivable and loans receivable
4. Commercial papers or commercial bills
5. Investments in nonputtable ordinary shares
6. Investments in nonconvertible and nonputtable preference shares
7. Accounts payable in local and foreign currency
8. Loans from bank and other third parties
9. Bonds and similar debt instrument
10. Loans to or from subsidiaries or associates that are due on demand.
A commercial paper is an unsecured and short-term debt instrument issued
by a large corporation.
A puttable instrument is a financial instrument that gives the holder the right to
sell the instrument back to the issuer for cash or is automatically redeemed or
purchased by the issuer on the occurrence of an uncertain future event or
upon the death of the holder.
To be classified as basic financial instrument, the investment in ordinary
shares must be nonputtable and the investment in preference shares must be
nonconvertible and nonputtable.
The investment in ordinary shares and noncovertible preference shares is
nonputtable when:
a. The entity does not have an option to sell the shares back to the issuer
for cash.
b. There is no arrangement that could result in the shares being
automatically sold or returned to the issuer because of a future event.
Conditions for basic financial instruments
A debt instrument shall be considered a basic financial instrument if all of the
following conditions are satisfied:
1. Returns to the holder are a fixed amount, a fixed rate of return or a
variable return that throughout the life of the instrument is equal to a
single quoted rate.
2. There is no contractual provision that could, by the terms, result in
the holder losing the principal amount or any interest.
3. Contractual provisions that permit or require the debtor to prepay the
debt instrument or permit or require the creditor to put it back to the
debtor before maturity are not contingent on future events, except:

a. To protect the holder against a change in the credit risk of the

issuer or a change in control of the issuer.
b. To protect the holder or issuer against changes in relevant
taxation or law.
An example of the exception would be a bank loan that permits the
borrower to terminate the arrangement early, even though the borrower may
be required to pay a penalty to compensate the bank for costs of the early
termination.
4. There are no conditional returns or repayment provisions contingent
on future events.
Simply stated, a debt instrument shall be considered a basic financial
instrument when the creditor is assured of the payment of the fixed amount of
principal and fixed amount of interest without any conditions.
The payment or prepayment of the principal and interest must be
unconditional.

Nonbasic financial instruments

The PFRS for SMEs specifically mentions that the following financial
instruments do not normally qualify as basic financial instruments:
a. Asset-backed securities, such collateralized mortgage obligations,
repurchase agreements and securitized packages of receivables.
b. Derivative contracts
 c. Hedging instruments
d. Commitments to make a loan to another entity
e. Commitments to receive a loan if the commitment can be net settled
in cash
Outside the scope of PFRS for SMEs
The PFRS for SMEs applies to all financial instruments, except the following:
a. Investments in subsidiaries, associates and joint ventures
b. Financial instruments that meet the definition of an entity’s own equity,
including equity component of compound financial instruments
c. Leases
d. Employers’ rights and obligations under employee benefit plans
e. Contract for contingent consideration in a business combination
f. Insurance contract
g. Share-based payment transaction
h. Reimbursement asset
Initial measurement
The PFRS for SMEs provides that basic financial instruments are initially
measured at the transaction price, including transaction costs.
However, the transaction costs are expensed immediately if the instrument is
measured at fair value through profit or loss.
The basic financial instrument is measured at the present value of the future
payments discounted at the market rate of interest under the following
conditions:
a. The arrangement is in effect a financing transaction.
b. The payment is deferred beyond normal credit terms.
c. The arrangement is financed at an interest rate that is not a market
rate.
Subsequent measurement
The PFRS for SMEs provides that basic financial instruments are
subsequently measured at fair value through profit or loss, amortized cost or
cost less impairment depending on the instruments.
1. Basic debt instruments are measured at amortized cost using the
effective interest method.
2. Investments in nonputtable ordinary shares and investments in
nonconvertible and nonputtable preference shares are measured at fair
value through profit or loss when:
a. The shares are publicly traded.
b. The fair value can be measured reliably without undue cost or
effort.
Such investments are measured at cost less impairment if the shares are not
publicly traded or the fair value of the shares cannot be measured reliably
without undue cost or effort.
ASSOCIATE
An associate is an entity over which the investor has significant influence but
is neither a subsidiary nor a joint venture of the investor.
Significant influence
Significant influence is the power to participate in the financial and operating
policy decisions of the associate but is not control or joint control over those
policies.
Significant influence is presumed to exist when the investor holds at least
20% of the investee’s voting power.
Measurement
The PFRS for SMEs provides that an investor shall account for all of its
investments in associates using any one of the following:
a. Cost model
b. Equity method
c. Fair value model

Cost Model
Under the cost model, the investment in associate is initially measured at
transaction price including transaction cost.
Subsequently, the investor shall measure the investment in associate at cost
less any accumulated impairment losses.
However, the cost model is not permitted if the investment in associate has a
published price quotation.
In other words, the investment in associate shall be accounted for using the
fair value model if there is published price quotation.
The investment in associate carried at cost is tested for impairment whenever
there is an indication of impairment.
All dividends and other distributions received are recognized as income
without regard whether the dividends are from preacquisition or
postacquisition retained earnings of the associate.
Equity method
This is the same equity method under full PFRS
Under the equity method, the investment account is initially recognized at
transaction price including transaction cost.
Subsequently, the investment is adjusted to reflect the investor’s share in
profit or loss and other comprehensive income of the associate.
Dividends and other distributions received from the associate are recognized
as reduction of the carrying amount of the investment.
The investment in associate carried at equity is tested for impairment
whenever there is an indication of impairment.
The excess of the acquisition cost over the fair value of the net identifiable
assets acquired is goodwill which is included in the carrying amount of the
investment.
Any goodwill included in the carrying amount of the investment is amortized
over the useful life.
The goodwill is not tested for impairment separately but rather as part of the
test for impairment of the investment as a whole.
On the other hand, the excess of the fair value of the net identifiable assets
acquired over acquisition cost is included in the investor’s share of profit or
loss of the associate.
Fair value model
Under the fair value model. The investment in associate initially measured at
the transaction price, excluding transaction cost.
At each reporting date, the investment is measured at fair value with changes
in fair value recognized in profit or loss.
The best evidence of fair value is the quoted price in an active market.
If there is no active market, the fair value is estimated using a valuation
technique.
If it is impracticable to measure fair value reliably without undue cost or effort,
the investment is accounted for under the cost model.
What constitutes undue cost or effort is a matter of judgment.
*Impracticable” is a high hurdle.
The investment in associate carried at fair value is not tested for impairment.
Financial statement presentation
Investments in associates shall be presented as a separate line Item under
noncurrent assets.
a. The accounting policy for the investments in associates.
b. The carrying amount of Investments in associates.
 c. The fair value of investments accounted for using the equity method for
which there is a published price quotation.
d. Reasons why fair value measurement would involve undue cost or
effort.
Comparison with full PFRS
The significant difference between the PFRS for SMEs and full PFRS lies in
the measurement of the investment in associate.
Under PFRS for SMEs, all investments in associates are accounted for using
any one of the cost model, equity method or the fair value model.
In other words, only one accounting policy or one model shall be applied in
accounting for all investments in associate.
Under full PFRS, the investor has no accounting policy choice.
The investments in associates shall be accounted for using the equity method
only.
Moreover, any implied goodwill included in the carrying amount of the
investment is amortized under PFRS for SMEs.
Under full PFRS, goodwill included with carrying amount of the investment is
not amortized.
PFRS for SMEs does not provide complete guidance on significant influence
unlike full PFRS.
INVESTMENT PROPERTY
The PFRS for SMEs defines investment property as:
Property (land, building or part of a building, or both) held by an owner or by
the lessee under a finance lease to earn rentals or for capital appreciation or
both, rather than for:
a. Use in the production or supply of goods or services or for
administrative purposes, or
b. Sale in the ordinary course of business.
Examples of investment property
1. A building that is rented out to independent parties under an operating
lease
2. A tract of land acquired as a long-term investment
3. A building that is rented out under an operating lease and the entity
provides cleaning, security and maintenance services
If the services provided by the entity are insignificant to the lease
agreement, the property is investment property.
However, if the services are a significant part of the arrangement, for
example, a hotel, the building is property, plant and equipment.
4. A tract of land held for an undetermined future use
The PFRS for SMEs does not specify how to classify such land.
According to full PFRS, such land is classified as investment property.
Initial measurement of investment property
An SME shall measure investment property initially at cost.
The cost of a purchased investment property comprises the purchase price
and any directly attributable expenditure such as legal and brokerage fees,
property transfer taxes and other transaction cost.
Subsequent measurement of investment property
The PFRS for SMEs provides that investment property whose fair value can
be measured reliably without undue cost or effort shall be measured at fair
value at the end reporting period.
Any changes in fair value shall be recognized in profit or loss.
Subsequent measurement is driven by circumstance rather than accounting
policy choice.
If the fair value of the investment property can be measured reliably, the entity
must use the fair value model.
If the fair value of the investment property cannot be measured reliably, the
entity must use the cost-depreciation-impairment model.
The residual value of such property is deemed to be NIL or zero as the fair
value cannot be measured reliably without undue cost or effort on an ongoing
basis.
The investment property whose fair value cannot be measured reliably on an
ongoing basis is presented as a separate line-item investment property
carried at cost less accumulated depreciation and impairment.
Transfer
An SME shall transfer property to or from investment property only when the
property meets or ceases to meet the definition of investment property.
Thus, if a reliable measure of fair value is no longer available for investment
property using the fair value model, the entity shall account for that investment
property using the cost-depreciation-impairment model until a reliable
measure of fair value becomes available.
This is deemed a change in circumstance and not a change in accounting
policy.
The carrying amount of the investment property on the date of transfer
becomes the cost as a separate item of investment property.
Comparison with full PFRS
Under PFRS for SMEs, investment property is measured at fair value if the
fair value can be measured reliably without undue cost or effort on an ongoing
basis.
Otherwise, the investment property is accounted for separately using the cost-
depreciation-impairment model.
If the entity follows the cost model, the fair value of the property must be
disclosed.
Full PFRS allows an accounting policy choice of either fair value model or
cost model.

QUESTIONS
1. Explain the measurement of inventories of an SME.
2. Explain the treatment of a loss on inventory writedown under PFRS for
SMEs.
3. Give examples of basic financial instruments.
4. Define a puttable and nonputtable instrument.
5. What is the requirement in order that investment in ordinary shares can
be classified as basic financial instrument?
6. What are the conditions in order that a debt instrument shall be
considered as basic financial instrument?
7. Explain the initial and subsequent measurement of basic financial
instruments.
8. Define an associate.
9. Explain the cost model of measuring investment in associate..
10. Explain the equity method of measuring investment in associate.
11. Explain the fair value model in measuring investment in associate.
12. Compare PFRS for SMEs and full PFRS in relation to measurement of
investment in associate.
13. Define investment property.
14. Explain the initial and subsequent measurement of investment
property.
15. Compare PFRS for SMEs and full PFRS in relation to investment
property.
PROBLEMS
Problem 26-1 (IFRS)
An SME buys goods priced at P500 per unit. The supplier awards the buyer a
20% discount on orders of 100 units or more. Furthermore, when the buyer
has purchased 1,000 units or more in a calendar year, the supplier awards the
buyer a further volume discount of 10% of the list price.
The additional volume discount applied to all units acquired during the
calendar year.
At the beginning of current year, the SME purchased 800 units from the
supplier. In the later part of the year, the SME purchased a further 200 units.
At year-end, 150 units were unsold.
What is the cost of the inventory at year-end?
a. 52,500
b. 75,000
c. 67,500
d. 60,000
Problem 26-2 (IFRS)
At the beginning of current year, an SME acquired goods for sale in the
ordinary course of business for P 1,000,000, including P50,000 refundable
purchase taxes.
The supplier usually sells goods on 30 days’ interest-free credit. An
appropriate discount rate is 10%.
However, as a special promotion, the purchase agreement for these goods
provided for payment to be made in full after one year.
In acquiring the goods, transport charges of P20,000 were incurred.
What is the cost of purchase?
a. 950,000
b. 863,550
c. 970,000
d. 883,550
Problem 26-3 (IFRS)
On January 1, 2019, SME acquired 25% of the equity of each of entities B, C
and D for P 1,000,000. P 1,500.000 and P2,800,000 respectively.
Transaction costs of 1% of the purchase price were incurred by SME.
On January 2, 2019 entity B declared and paid dividend of P100,000.
On December 31, 2019, entity C declared and paid a dividend of P800,000
For the year ended December 31, 2019. entities B and C recognized profit
respectively of P500,000 and P1,800,000
However, entity D recognized a loss of P2,000,000 for 2019
Published price quotations do not exist for the shares of entities B, C and D.
Using appropriate valuation techniques SME determined the fair value of the
investments in entities B, C and D on December 31, 2019 at P1,300,000 and
P1,500.00O respectively.
Costs of disposal are estimated at 5% of the fair value of the investments.
Required:
Prepare journal entries to record the investments associates of SME for the
current year using:
a. Cost model
b. Equity method
c. Fair value model
Problem 26-4 (IFRS)
On January 1, 2019, an SME acquired 30% of the ordinary shares of an
investee for P 1,000,000 plus transaction cost of P10,000
The SME used the cost model to account for the investment in associate.
The investee recognized a net loss of P500,000 for 2019 and paid dividends
of P200,000 on December 31, 2019.
The fair value of the investment is P 1,020,000 on December 31, 2019 and
the cost of disposal is estimated at P40,000.
There is no published price quotation for the investment in associate.
1. What is the carrying amount of the investment in associate on December
31, 2019?
a. 1,020,000
b. 1,010,000
c. 950,000
d. 980,000
2. What is the carrying amount of the investment in associate on December
31, 2019 assuming there is a published price quotation?
a. 1,020,000
b. 1,010,000
c. 1,000,000
d. 980,000
Problem 26-5 (FRS)
On January 1, 2019, SME acquired a 30% interest in the ordinary shares of
another entity that carry voting rights for P15,000
On this date, the carrying amount of the net assets acquired is P13,250,000.
The carrying amount of the identifiable assets and liabilities of the investee
equalled fair value except for equipment whose fair value exceeded the
carrying amount by P2,500,000.
The remaining useful life for the equipment is five years and any implicit
goodwill is amortized over the maximum allowed by SME standard.
On December 31, 2019, the investee reported net income of P20,000,000 and
declared dividend of P7,500,000.
The fair value of the investment in associate is P21,250,000 on December 31,
2019 and there is no published price quotation. SME elected to use the equity
method.
1. What is the implied goodwill from the acquisition?
a. 1,750,000
b. 1,000,000
c. 750,000
d. 0
2. What is the investment income for 2019?
a. 2,250,000
b. 6,000,000
c. 5,750,000
d. 5,850,000
3. What is the carrying amount of the investment in associate on December
31, 2019?
a. 18,500,000
b. 21,250,000
c. 16,750,000
d. 18,600,000
Problem 26-6 (IFRS)
On January 1, 2019, an SME acquired property consisting of ten identical
freehold detached houses each with separate legal title including the land on
which it is built for P200,000,000, 20% of which is attributable to the land. The
units have a useful life of 50 years.
The following costs are also incurred on such date:
 Non-refundable transfer taxes not included in
The purchase price 20,000,000
  Legal cost directly attributable to the acquisition 1,000,000
 Reimbursement to the previous owner for prepaying non-refundable
property taxes for the six-month period ending
June 30, 2019 100,000
 Advertising campaign 500,000
 Opening function to celebrate new rental business 200,000
On June 30, 2019, SME paid local property taxes of P200,000 for the year
ending June 30, 2020.
Throughout 2019, SME incurred repairs and maintenance of P120,000.
SME used one of the ten units to accommodate the administration and
maintenance staff.
The other nine units were rented out to independent parties under operating
leases.
Refundable deposits held by SME on December 31, 2019 totalled P270,000.
Rent received in the year ended December 31, 2019 totalled P 1,550,000 of
which P50,000 related to January 2020.
On December 31, 2019, the fair value of each unit was reliably estimated at P
25,000,000.
The fair value of the units can be measured reliably on an ongoing basis
without undue cost or effort.
Required:
Prepare journal entries to record the transactions for 2019.
Problem 26-7 Multiple choice (IFRS)
1. Inventories must be measured at
a. Cost
b. The lower of cost and estimated selling price less cost to complete and
dispose
c. The lower of cost and fair value less cost to complete and dispose
d. The most recent purchase price
2. Under PFRS for SMEs, if the selling price less cost to complete and sell is
lower than cost of Inventory, the writedown is recognized
a. As an impairment loss
b. As component of cost of goods sold
c. As an impairment loss or a component of cost of goods sold
d. Directly in retained earnings
3. Consumable stores or supplies to be consumed in the production process
are included in
 a. Inventory
b. Property, plant and equipment
c. Investment property
d. Intangible assets
4. A property developer must classify properties that it holds for sale in the
ordinary course of business as
a. Inventory
b. Property, plant and equipment
c. Financial asset
d. Investment property
5. An SME may use techniques for measuring cost of inventories if the results
approximate cost. Accepted techniques include all of the following, except
a. Standard cost
b. Retail method
c. Most recent purchase price
d. Gross profit method
Problem 26-8 Multiple choice (IFRS)
1. All of the following are considered basic financial instruments, except
a. cash
b. Investment in bonds
c. Accounts receivable
d. Investment in convertible preference shares
2. All of the following are considered basic financial instruments, except
a. Demand and fixed-term deposit
b. Option and forward contract
c. Loan from subsidiary due on demand
d. A debt instrument that becomes payable on demand if the issuer
defaults on interest or principal payment.
3. For a basic financial instrument measured at amortized cost, the
impairment loss is
a. The difference between the carrying amount of the asset and the best
estimate of the amount that would be received if the asset were sold.
b. The difference between the carrying amount of the asset and the
present value of estimated future cash flows at market rate.
c. The difference between the carrying amount and fair value of the asset.
d. The decline in fair value of the asset.
4. It is a financial instrument that gives the holder the right to sell the
instrument back to the issuer or is automatically redeemed or purchased by
the issuer on the occurrence of a future uncertain event.
 a. Puttable instrument
b. Commercial paper
c. Nonputtable instrument
d. Debt instrument
5. Which statement is true in relation to the subsequent measurement of
basic financial instruments?
a. Basic debt instruments shall be measured at amortized cost using the
effective interest method.
b. Investments in nonconvertible nonputtable preference shares that are
publicly traded shall be measured at fair value through profit or loss.
c. Investments in nonputtable ordinary shares that are not publicly traded
or whose fair value cannot be measured reliably without undue cost or
effort shall be measured at cost less impairment.
d. All of these statements are true in relation to subsequent measurement
of basic financial instruments.
6. Which of the following in an SME’s statement of financial position is a
financial asset or financial liability?
a. A liability for an amount due to a supplier for a purchase of goods
b. An asset for a prepayment made to a supplier for the rent of a machine
for two months
c. A liability for a fine for the late payment of income tax by the entity
d. All of these are financial instruments
7. All of the following financial assets are basic financial instruments, except
a. Cash
b. Accounts receivable
c. A passive interest in the nonputtable ordinary shares of another eentity
d. An interest in the nonputtable ordinary shares where the investee is
classified as an associate of the entity.
8. All of the following are basic financial instruments except
a. Investment in nonconvertible and nonputtable preference shares.
b. Financial instrument that meets the definition of an entity’s own equity.
c. A fixed-interest fixed-term loan from a bank.
d. Investment in nonputtable ordinary shares.
9. All of the following are considered basic financial instruments, except
a. Accounts payable in foreign currency
b. Loan from associate due on demand
c. Investment in convertible debt
d. A debt instrument with a fixed rate of return
10. Which statement reflects the accounting for financial instruments under
IFRS for SMEs?
a. All financial instruments must be measured at fair value.
b. Reversal of an impairment loss is not allowed.
c. All amortized cost instruments must be tested for impairment.
d. All financial instruments must be measured at amortized cost.
Problem 26-9 Multiple choice (IFRS)
1. An associate is
a. An entity over which the investor has significant influence.
b. An entity over which the investor has joint control.
c. An entity over which the investor has significant influence or joint
control and that is not a subsidiary.
d. An entity over which the investor has significant influence and that is
neither a subsidiary nor an interest in a joint venture.
2. An SME shall account for investments in associate after initial recognition
using
a. Either cost model or fair value model and using the same policy for all
investments in associates.
b. Either cost model or fair value model and the model can be elected on
an investment by investment basis.
c. Any of the cost model, equity method or fair value model and using the
same accounting policy for all investments in associates.
d. Any of the cost model, equity method or fair value model and the model
can be elected on an investment by investment basis.
3. An SME that owns 30% of the voting ordinary shares
a. Has significant influence over the investee
b. Has no significant influence over the investee.
c. Has control over the investee.
d. Has significant influence over the investee, provided that it does not
have control or joint control over the investee.
4. Which would not lead to significant influence?
a. Holding directly 20% or more of the voting power of the investee.
b. Holding indirectly, through a subsidiary, 20% or more of the voting
power of the investee.
c. Holding indirectly, through a joint venture, 20% or more of the voting
power of the investee.
d. Holding directly 10% of voting power of the investee and holding
indirectly, through a subsidiary, 10% of the voting power of the
investee.
5. Which statement is true in relation to the initial measurement of
investment in associate?
 a. Under the cost model, the investment in associate is initially measured
at the transaction price plus transaction cost.
b. Under the equity method, the investment in associate is initially
measured at the transaction price plus transaction cost.
c. Under the fair value model, the investment in associate is initially
measured at the transaction price excluding transaction cost.
d. All of these statements are true.
6. Under the cost model, the investment in associate is subsequently
measured at
a. Cost
b. Cost less accumulated impairment loss
c. Fair value
d. Fair value less cost of disposal
7. Under the fair value model, the investment in associate is subsequently
measured at
a. Cost less accumulated impairment loss
b. Equity
c. Fair value less cost of disposal
d. Fair value
8. Investments in associates must be tested for impairment when the entity
uses
a. Cost model, equity method or fair value model.
b. Cost model or equity method.
c. Cost model or fair value model.
d. Equity method or fair value model.
Problem 26-10 Multiple choice (IFRS)
1. Investment property is defined as
a. Land or a building, or part of a building, or both held for sale in the
ordinary course of business.
b. Land or a building. Or part of a building, or both held to earn rentals
only
c. Land or a building, or part of a building, or both held for capital
appreciation only.
d. Land or a building, or part of a building. Or both held to earn rentals or
for capital appreciation or both.
2. An SME operates a bed and breakfast from a building it owns. The SME
also provides its guests with other services including housekeeping, satellite
television and broadband internet access. The daily room rental is inclusive of
these services. Furthermore, upon request, the entity conducts tours of the
surrounding area for its guests. Tour services are charged for a fee
separately. The SME should account for the building as
 a. Inventory
b. Investment property
c. Property, plant and equipment
d. Basic financial instrument
3. An SME must measure the investment property after initial recognition
a. At fair value or using the cost-depreciation-impairment model and
same accounting policy for all investment property.
b. At fair value or using the cost-depreciation-Impairment model elected
item by item
c. At fair value.
d. At fair value, for property whose fair value can be measured reliably
without undue cost or effort on an ongoing basis and the cost-
depreciation-impairment model for all other investment property.
4. A building is held by a subsidiary to earn rentals under an operating lease
from the parent. What is the accounting treatment of the building?
a. Accounted for as property, plant and equipment by the subsidiary and
an investment property by the group.
b. Accounted for as property, plant and equipment.
c. Accounted for as investment property.
d. Accounted for as an investment property by the subsidiary and
property, plant and equipment by the group.
5. What is the presentation of investment property accounted for using the
cost model?
a. Property, plant and equipment
b. Separate class of property, plant and equipment
c. Included in all investment property
d. Separate line item as investment property carried at cost less
accumulated depreciation and impairment