CA-Final Financial Reporting CA Parveen Jindal Classes
Loss on Exchange a/c Dr 40,000 (190000 – 150000)
New Asset a/c Dr 190,000 (Given up value) (150,000 + 40,000)
To cash 40,000 (FV + Cash)
To old Asset 190000 (WDV)
(Being Assets Exchanged in Lack of commercial substance)
Solution of Q.8 Discussed in Class
E. Initial Recognition in the books of Assumed owner
(In the books of Lessee under finance Lease/ Non Exempted Lease)
116
In the Given, Lessee shall recognise the Asset/IP, which is acquired under
Non Exempted Lease, at present value of Lease Liability as follows : -
ROU : Investment Property a/c Dr xxxx P.V of all future payments
To Lease Liability xxxx
(Being I.P recognised in the books of Lessee under Non Exempted Lease)
Solution of Q.11 Discussed in Class
*Part 5*
Concept 5 : Subsequent Recognition
Subsequent Expenditure on I.P
After Initial Recognition
Case I : Repairs & Maintenance Case II : Replacements & Additions
Case I : If any Expense is incurred in the form of Repair & maintenance (i.e., Day to
Day servicing) on Investment property then such an expense will be written
Off in P&L A/c in the same year in which it is incurred. Such an Expense can
Not be capitalised to the cost of property because It does not contribute
To the appreciation in value of I.P, but these are incurred to maintain Normal
Performance of an Asset.
(i.e., Lift maintenance, Property Tax, Repairs of walls, Repairs of floors, paint
etc.)
Case II : If any expenditure is incurred on replacement or additions of Assets then
Such an Expenditure can be capitalised to the cost of In=vestment property
because It is considered as a capital Expenditure. Such Expenditure is made
to increase the value of property (i.e., Expenditure on New Lift, Interiors,
Replacement of walls, Replacement of floor etc.)
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Calculation of Revised carrying Amount of I.P after Replacement/ Addition
Existing carrying Amount of I.P xxxx
Add : Expenditure on New Assets xxxx
Less : Scrap Realised from old Assets xxxx
Revised Carrying Amount xxxx
❖ Further Depreciation will be computed on Revised carrying Amount on the basis of
Remaining useful life of Assets.
Important Point to be considered :- (*Imp)
If any component is replaced of an Investment property then the following
Steps should be Applied :-
Step I : De-Recognition of old component
First of all, Existing carrying Amount for Replaced component should
Be de-recognised as follows :-
Bank a/c Dr xxxx (Scrap)
P&L a/c Dr xxxx (Loss)
To old Asset xxxx (B/s value)
(Being old Assets De- recognised)
Step II : Recognition of Expenditure on New Assets
Journal : New Assets a/c Dr xxxx
To Bank xxxx
(Being New Assets Recognised)
Solution of Q.19
I. Statement Showing carrying Amount of Assets at the end of 10th year
Building Interiors Total
O.cost 38.80 crores 1.20 crores 40 crores
Depreciation ( 7.76 crores) (.8 crores) (8.56 crores)
(38.80 x 10 y) ( 1.2 crores x 10y)
50Y 15 Y
Carrying Amount 31.04 Crores .4 crores 31.44 Crores
Journal :
i. P&L a/c Dr 0.4 crores
To old Interiors 0.4 crores
( Being old Assets De-recognised)
ii. New Interiors a/c Dr 1.5 crores
To Bank 1.5 crores
(Being New Expenditure capitalised)
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Statement Showing Depreciation for 11th year
Building New Interior Total
Opening Balance 31.04 crores 1.5 crores 32.54 crores
Depreciation (.776 crores) ( .1 crore) ( .876 Crore)
(31.04 crores) ( 1.5 crores)
40 Y 15 Y
Carrying Amount 30.264 crores 1.4 crores 31.664
Solution of Q .7 Discussed in class
Concept 6 : Measurement of I.P
At Balance sheet date, Investment property can be reported under “cost model”
Only. It means that Revaluation model cannot be applied. The following statement may
Be presented under cost model :-
Original cost xxxx
Accumulated Depreciation (xxxx)
*Impairment Loss (xxxx)
Carrying Amount xxxx
❖ If fair value of I.P becomes Less than WDV then decline in value can be recognised
in Books as Impairment Loss.
i. Impairment Loss a/c Dr xxxx
To Investment property xxxx
ii. P&L a/c Dr xxxx
To Impairment Loss xxxx
Important Notes :-
a. If fair value of I.P at B/S date becomes higher than WDV then It cannot be
Recognised in Books. It means that upward Revaluation is not allowed.
b. As per Ind AS 40, fair value can be reported in notes to A/cs. It will be choice of
Entity, but fair value disclosures are always encouraged by ICAI.
c. If an Entity wants to report fair value then It has to follow Ind AS 113 fair value
Measurement Rules which are as follows : -
i. Fair valuation should be done by independent value
ii. It should be reported as a complete package inclusive of all integral Assets
i.e., Lift , A.C etc.
Value of other Assets cannot be considered
additionally
Solution of Q.13 Discussed in Class
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Solution of Q.20
Statement showing fair value of Investment property.
i. Fair value of Air conditioning Plant ( 1m x 70%) * 0.7 million
ii. Fair value of Lifts (1.2 million x 50%) * 0.6 million
iii. Fair value of I.P (Bal fig.) 30.7 million
Total Fair value 32 million
❖ We have assumed that Depreciation has been charged by Entity on SLM Basis
Note : The above statement can be disclosed in Note to A/c only.
*Part 6*
Concept 7 : Transfers *Imp
As per the Provisions of Ind AS 40, Transfer of I.P can be made from one Ind AS to
Other on the basis of its use. The following Transfer can be made :-
Earlier After
I. Ind AS : 16 (PPE) Ind AS 40 : IP
(Held for use) (Held for Rental or Appreciation)
II. Ind AS : 40 (IP) Ind AS : 16 (PPE)
(Held for Rental) Put into sale ( Held for use in Business)
III. Ind AS :2 (Inventory) Ind AS : 40 (IP)
(It was held as stocks) (Held for Rentals)
IV. Ind AS : 40 (IP) Ind AS : 2 (Inventory)
(Held for Rentals) (Put into Sale)
Notes :
1. There will be no Journal Entry in the books for such Transfer, but Disclosures shall
Be updated only according to Appropriate heading.
2. The Transfer from one Ind AS to other will be made at “Carrying Amount” only. It
Means that there will be no measurement under previous Ind AS before making
Transfer of Assets.
3. After completing Transfer Process, measurement of property will be made as per
New Ind AS.
Solution of Q.12 (*Imp)
Statement Showing calculation of carrying Amount of factory as at 1.4.x5
Original cost (1.4.x1) 10 millions
Depreciation (4 years) (4 millions)
Carrying Amount 6 millions
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Notes :
1. We will Transfer the Given factory from Ind AS 16 to Ind AS 40 at 6 millions which
Is the carrying Amount of property on such date.
2. We cannot incorporate fair value of 8 millions in the books of A/Cs because Ind AS
40 does not allow upward Revaluations.
3. The Disclosures of fair value of 8 millions can be made in Notes to A/cs as per
Measurement Rules.
Solution of Q.14
1. At 31.3.x1, the Given Investment Property will be transferred from Ind AS 40 to
Ind AS 16 at ₹ 15,00,000 which is its carrying Amount on such date.
2. After such Transfer, we should write off ₹ 5 Lacs as Impairment Loss under Ind AS
16 cost model. The Revised carrying of such PPE will be considered at ₹ 10 Lacs & It
Will be depreciated over remaining useful Life.
Solution of Q.21 (*Imp)
1. The Given office Building will be transferred from Ind AS 16 (PPE) to Ind AS 40
(IP) at ₹ 10 crores which is carrying Amount on Such date.
2. In the Given case, Property B will be transferred from Ind AS 40 (IP) to Ind AS 2
(Inventory) at ₹ 30 crores which is carrying Amount of such property on that date.
Concept 8 : Disposal of I.P
Sale of Investment Property
Transfer of ownership Transfer under finance Lease
If Selling Price If Selling price
Is collected in Lump is collected in
sum Installments
(Deferred Sale)
Case I : If S.P is collected in Lump Sum
If I.P is sold for Lump Sum consideration then we will calculate Loss or Profit
On sale of Assets by the difference in Net selling Price & carrying Amount of such I.P.
(Selling Price – Selling Exp.)
Note : the Amount of Loss/Profit will be transferred to P&L A/c.
Journal : Bank a/c Dr xxxx (N.s. Price)
Loss on Sale a/c Dr xxxx (Bal fig)
To I.P xxxx (carrying Amt)
To Profit on Sale xxxx (Bal fig)
(Being Investment property Sold)
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Example :
i. Carrying Amount : ₹ 10,00,000
ii. Sale consideration : ₹ 15,00,000
iii. Brokerage @ 1 % on S.P
Solution :
i. Bank a/c Dr 1485000 (15 L – 1%)
To I.P 10,00,000
To Profit on sale 485000 (Bal Fig)
(Being Investment property sold)
ii. Profit on sale a/c Dr 485000
To P&L 485000
(Being Profit Recognised)
Case II : If Selling price is collected in Installments
Step I : Calculate Present value of all cash Inflows which are Expected from Sale of I.P.
Step II : Loss/Profit on Sale = P.V of Inflows (Step I) – Carrying Amount
Step III : Calculate Interest Income on Receivables & Transfer it P&L over the Period
On Accrual basis.
Example :
a) Carrying Amount : ₹ 15,00,000
b) Sale consideration : ₹ 500,000 (Now)
₹ 15,00,000 (1Y)
₹ 500,000 (2Y)
c) Market Rate : 10%
Pass Journal Entries for 2 years in case of Given Transaction.
Solution :
Step I : Calculation of P.V of Cash Inflows
Period Cash inflow P.V factors @ 10% Present value
0 500,000 1 5,00,000
1 15,00,000 .909 13,63,500
2 500,000 .826 413,000
P.V of Cash Inflow 22,76,500
Step II : Calculation of P/L on sale of I.P
Bank a/c Dr 5,00,000
Debtors a/c Dr 17,76,500 (22,76,500 – 5,00,000)
To I.P 15,00,000
To Profit on Sale 7,76,500 (Bal Fig)
(Being I.P sold on Credit)
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