Professional Documents
Culture Documents
1. Define investment
property and owner-
occupied property.
An investment property is
land or a building (or part of a
building), or both held (by the
owner or by the lessee under a
finance lease) to earn rentals or for
capital appreciation or both, rather
than for use in the production or
supply of goods or services or for
administrative purposes or sale in
the ordinary course of business.
An owner-occupied
property is property held by
the owner or by the lessee
under a finance lease for use in
the production or supply of
goods or services or for
administrative purposes.
2. What are the initial
recognition criteria for
investment property?
How should it be
measured initially and
subsequently?
Investment property should be
recognized as an asset when, and
only when
(a) it is probable that the future
economic benefits that are
associated with the investment
property will flow to the entity;
and
(b) the cost of the investment
property can be measured
Investment property is initially
measured at cost, including
transaction costs. Such cost
should not include start-up
costs, abnormal waste, or
initial operating losses
incurred before the
investment property achieves
IAS 40 permits entities to
choose between:
(a) fair value model
(b) cost model
One method must be adopted
for all of an entity's investment
property. Change is permitted
only if this results in a more
appropriate presentation.
3. Considering the nature,
initial recognition and
subsequent measurement
of investment property,
what are the usual
assertions tested with
regard investment
Assertions Descriptions
1. Existence Acquisitions and disposals are properly authorized.
The recorded assets really exist.
2. Rights and obligations The recorded assets are owned by the company.
Disposals of assets represent the transfer of the risks and benefits in
them to third parties.
6. Classification Capital expenditure and revenue expenditure, and finance lease and
operating lease are properly classified.
Refer to Louwers
Question 8.47 page 338.
*Property, plant and equipment terms
are assumed to be investment
property
REQUIRED: For each of the assertions, select the one best
substantive audit procedure for obtaining competent evidence.