4(b) The following is the financial statements of Kressi Plc. Kressi is a manufacturing company but also has a wide portfolio of investment properties. The following is Kressi's Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2017. Revenue Cost of sales Gross profit Investment income Administrative cost Other expenses Operating profit Net finance costs Profit before tax Income tax expense Profit for the year Other comprehensive income Items that will not be reclassified to profit or loss Gains on property revaluation Total comprehensive income for the year RM million 420 (304) 116 42 (22) (34) 14 84 201 102 (2) 100 (30) 70 Kressi holds properties for investment purposes. At 1 July 2016, Kressi held a 10-floor office block at a fair value of RM90 million with a remaining useful life of 15 years. The first floor was occupied by Kressi's staff and the second floor was let to family members for free. The other eight floors were all let to unconnected third parties at a normal commercial rent rates. Kressi has estimated that the fair value of the office block was RM96 million at 30 June 2017. Kressi has a policy of restating all land and buildings to fair value at each reporting date. The only accounting entries for the year ended 30 June 2017 in relation to this office block have been correctly include the rental income in profit or loss. It can be assumed that each floor is of equal size and value. Depreciation is charged to administrative costs. During April 2017, in a heavy downpour, an office block near a cliff was affected by a heavy rain and mud slide causing substantial damage. It was estimated that the fair value fell from RM20 million at 30 June 2016 to RM14 million at 30 June 2017. Kressi has estimated that costs of RM3 million would be required to repair the block but is unsure whether to carry out repairs or to sell the block for a reduced price. The property has been left in the financial statements at a value of RM20 million. A provision of RM3 million for the repair costs was charged to other expenses. Required: (i) Advise the necessary accounting treatment for Kressi for the year ended 30 June 2017, and the appropriate impairment with respect to MFRS 140 Investment Properties. 10 10 (10 marks) (i) Differentiate between investment property and owner-occupied property. (2 marks) (Sub-total 12 marks) [Total 25 marks]