(a) Discuss why IAS 40 Investment Property was produced.

(b) Universal Entrepreneurs plc has the following items on its PPE list:

(i) £1,000,000 – the right to extract sandstone from a particular quarry. Geologists predict that extraction at the present rate may be continued for ten years.

(ii) £5,000,000 – a freehold property, let to a subsidiary on a full repairing lease negotiated on arm’s-length terms for 15 years. The building is a new one, erected on a green-field site at a cost of £4,000,000.

(iii) A fleet of motor cars used by company employees. These have been purchased under a contract which provides a guaranteed par t exchange value of 60% of cost after two years’ use.

(iv) A company helicopter with an estimated life of 150,000 flying hours.

(v) A 19-year lease on a property let out at arm’s-length rent to another company.

Required:

Advise the company on the depreciation policy it ought to adopt for each of the above assets.

(c) The company is considering revaluing its interests in land and buildings, which comprise freehold and leasehold properties, all used by the company or its subsidiaries.

Required:

Discuss the consequences of this on the depreciation policy of the company and any special instructions that need to be given to the value.