•.
•,,
,.,
1) Calculation of Interest for the period
5,000 X 65 X 5% • 16,250
lndfan Accou11tf
11
1 S!,JM--..
·-.w "' I
ii) Increase in the liability towards principal amount
5,000 X (65 · 60) • 25,000
iii) Interest, if the loan was borrowed in the home
currency
5,000 X 60 X 12% • 36,000
iv) Exchange rate difference accounted
• 36,000 - 16 ,250 • 19,750
Calculation of bor row ing cos t
Total Interest for the period
Add: Increase in the liability towards principa • 16,250
l amount
Borrowing Cost • 25,000
Exchange rate difference is not to be accounte -t1,250
d in the case as the difference bet
borrowing In the local currency and the fore
liability. ign currency is greater than the total Increase
Wetn the
1 "
n tl.e
INVESTMENT PROPERTY IND AS 40
Object1ve
The objective of this Standard is to prescribe
property and related disclosure requirements. the accounting treatment for lnv~trrer.~
Mean1na of Investment Property
The term an investment property refers to an - - •
it), or both , if they are held for the following spec investment in land or a building (or a part of
- - - _ ..i
ific purposes of earning rentals income or for
the capital appreciation of property; or for both
. An investrrent property is capable o f ~
cash flows Independently of other assets held
by the concern.
Scope of l;'ld AS 40
_
This Standard shall be applied in the recognition,
property. measurementandcHsctosureof if._.
This Standard does not deal with matters cov
ered in Ind AS 17, Leases, tndudlnr-
(a) classification of leases as finance leases
or operating leases:
(b) recognition of lease income from investm
ent property -•
(c) measurement in a lessee's financial stat
ements of property Interests held
lease accounted for as an operating lease;
(d) measurement in a lessor's financial stat .., .
ements of its net investment tn 1
lease;
(e) accounting for sale and leaseback transact
ions; and
(f) disclosure about finance leases and
operating leases.
This Standard does not apply to:
(a) Biological assets related to agricultural acti
vity (see Ind AS 41,
16 Property, Plant and Equipment); and
LIBRARY
ACHARYA TULSI
NATIONAL COLLEGE OF COMMERCf:
pr0tfsfOJI
under Accounting Standard for Items appear fn Financial Statements SHIVAMOGGA 16 9
·
b) Mineral rights and mineral_reserves such as oil, natural gas and similar non-
( regenerative resources •
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~ ~ii~; ~t:~:~;; ~;d~1;t h;;··s t;~d~;d-~t11•·th;~r,;e~~ings_·~p~cifi;d: . - - . . . . .
carrying amount is the amount at which an asset is recognised in the balance sheet.
cost is the amount of cash or cash equivalents paid or the fair value of other consideration
.
0
to acquire an asset at the time of its acquisition or construction Fair value is the price
giv~ would be received to sell an asset or paid to transfer a liability in an orderly transaction
th~ween market participants at the
measuremen t date.
~ . .
owner-occupied property 1s property held (by the owner or by the lessee under a finance
tease) tor ~se in the production or supply of goods or services or for administrative purposes.
-··•"-
~ ~
Investment property shall be recognised 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 reliably.
u=.remer,f at feC~iilo,'1
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An investment property shall be measured initially at its cost. Transaction costs shall_be
included in the initial measuremen t.
Toe cost of a purchased investment property comprises its purchase price and any directly
attributable expenditure. Directly attributable expenditure includes, for example, professional
fees for legal services, property transfer taxes and other transaction costs.
Measurement after recognition
An entity shall adopt as its accounting policy the cost model prescribed in paragraph 56 to
all of its investment property.
~
An entity shall disclose:
(a} Its accounting policy for measuremen t of investment property.
(b} When classification is difficult the criteria it uses to distinguish investment property
from owner-occupied propert~ and from property held for sale in the ordinary course
of business.
(c} The extent to which the fair value of investment property (as measured or disclosed
in the financial statements} is based on a v~luation by an independent value~ who
holds a recognised and relevant professional qualification an? has recent expenence
in the location and category of the investment property bemg valued. If there has
been no such valuation, that fact shall be disclosed.
(d) The amounts recognised in profit or loss for:
(i) Rental income from investment property; .. f m
l ding repairs and maintenance} ansmg ro r.
(ii) Direct operating :~:!~~n :~:d rental income during the period; and
. Investment Prope includin repairs and maintenance) arisi_ng from
(Hl) Direct operating rtyexpethnsest
diJ not aen!rate rental Income during the penod.
investment prope a 0
p
170 Indian Accounting Standards-I
inves tmen t property
(e) The exist ence and amounts of restrictions on the realisability of
~r the remit tance of income and proceeds of disposal.
t Property or for
(f) Cont !°ctu al obligations to purchase, const ruct or develop Investmen
repa1rs, main tenan ce or enhancements. ·- • .... . ,. "•1
Illustration 49 ., · ... ......
·
- . . . .. .. . .. .._
~
. •:
. ' L--- •-' "'"•·--;-~ A..
i
for f 40,00,000.
On 1st April, 2021 an entity acquired an inves tmen t prope rty (building)
ured from the date of
Management estim ates the useful life of the building as 20 years meas nt believes that the
geme
acqui sition . The residual value of the building is f 2,00,000. Mana
expe cts to consume the
straig ht-lin e depre ciatio n method reflec ts the patte rn in which it a
building on 31st March,
building's futur e economic benefits. What is the carrying amount of the
2022?
Solution
Cost of the asset is? 40,00,000.
000) = f 38,00,000
Depreciable amou nt = Cost less Residual value = ~ (40,00,000 - 2,00,
Depreciable amount
Depreciation for the year= Useful Life
= t 38,00 ,000/ 20
= t 1,90,000.
Carrying amou nt = Cost Less accumulated depre ciatio n
= t 40,00,000 - 1, 90,000 = t 38, 10,00 0.
J • ,._.
• •• - , . ~ ...... •• - ~.:-,i,.~,::• •· - - ~ .. ";. ~.,..--,,.. - ~
. . · - : · " " " · •. ." ' · ~. . .
..
Illustration 50 ·
X Limited has an inves tmen t prope rty (building) which is carrie d
in Balance Shee t on 31st
g out the building and
March, 2021 at t 15,00,000.· During the year X Limited has stopp ed Lettin
ates the recoverable
used it as its offic e prem ise. On 31st March, 2021, mana geme nt estim years and residual
as 20
amou nt of the building as f 10,00,000 and its remaining usefu l life
prope rty as on 31st March,
value is nil. How should X Limited accou nt for the above inves tmen t
2021?
Solution
tmen t property to
At 31st March, 2021, X Limited must trans fer the prope rty from inves ing.
said build
property, plant and equip ment since there is a chan ge in use of the
The trans fer should be made at its carrying amou nt i.e., f 15,00 ,000.
is f 10,00,000,
Since recov erabl e amou nt of the prope rty as on 31st ·March, 2021
of Profit and Loss. So, the
impai_rment loss ?. 5,00,000 should be recognized in the State ment
f 10,00 ,000.
carrymg amou nt of Inves tmen t prope rty at 31st March,2021 would be
The entity must disclose the recla ssific ation .
0y From April, 2021, X Limited will depre ciate the build
ing over its rema ining useful life of
2 ears.
~
lllustratton 51
I : • '
., ~ •• • , • ., •
In financial yea 20 22 2· · .· . . · ,__ -- - · · ·· .
ing expen diture in acquiring pro~ri;Y
consisting of 6 iden~ cal ~- , XL m ted mcurred the followtitle
1 1
built. ouses each with sepa rate legal including the land on which 1t 1s
,,,
w:
Tt't-f •x~n dttu re Incu rred on vario us date s Is gfven belo
00.
c, 1st Apri l, 202 1 · Purchase cost of the prop erty t' 1,80,00,0
,000 (not fndude-d fn the purchase
c, 1st April , 2021 • Non•rcfundable transfer taxes t' 20,00
C05 t).
on t 5,00,000.
0!1 2nd April, 2021 • Lcgc1 l cost relat ed to prop erty c1cqulsfti
on 6th April. 2021 · Adve rtisement cc1mpa ign to attra ct tena nts? 3,00,000.
000.
on8th April, 202 1 · Open ing cere m ony func tion for start ing busfness f 1,50,
y repair mafn tenan ce and other
Throughou t 202 1-22, incur red ? 1,00,000 towclrds dcly-to-da
admin istra tive expenses.
dation of its few staffs. The
X L1m1tcd uses or.c of the six houses for offic e and accommo
parti es.
other five houses Jrc rente d to vJrious Indepen dent third
expenses In the books of account?
How X L:m1tcd will account for all the abov e-me ntion ed
Solution
5,00 ,000} .. t 2,05 ,00,0 00.
The co~t of th e prop erty ,., ! (1,80 ,00,0 00 + 20,0 0 ,000 +
h of the prop erty cost wfll be
Since five h ouse s ou t o f sf x are bein g rent ed, so 516t
of the prop erty cost will be accounted
accounted for as Jn Investm en t prop erty and ~ /6th
for as own~ r- occu pied prop er t y.
? 2, 05, 00,0 00 X 5 / 6 =- t 1,70 ,83,3 3)
Cost of the 1n-.·es t mcn t prop erty
C~t cf the owner-cccup1cd prop erty ll t (2, 05 ,00,0 00 • 1,70 ,83,3 33) a f :M, 16,667.
nses and repafr maintenance
All othe r costs, f.e. , c1dvc rt lscrn ent cx~ ns~ , ceremony expe
expenses w1 ll be expensed of f as and when Incu rred.
