Question
A listed company that prepares its financial statements in accordance with the IFRS bought a building in late 2020. The acquisition cost of the building
A listed company that prepares its financial statements in accordance with the IFRS bought a building in late 2020. The acquisition cost of the building was 1,500,000. The estimated useful life of the building is 75 years. As the prices of property rose remarkably during 2021, the company could have sold the building for 1,800,000. (The company did not sell the building).
Over a year later the financial statements show the following:
a) The statement of financial position as at 31 December 2021:
Property, plant and equipment: | |
Building | 1,500,000 |
Less: Accumulated depreciation | (20,000) |
Net book value | 1,480,000 |
b) The statement of profit or loss and other comprehensive income for the year ended 31 December 2021:
Depreciation expense | 20,000 |
Choose the appropriate answers based on the above:
1. The company uses the ["revaluation", "cost"] model for accounting for their buildings classified as property, plant and equipment.
2. If the building was classified as investment property, the company could account for it using ["only the fair value model", "only the cost model", "either the cost model or fair value model"] .
3. In case the building was classified as investment property, it would not be depreciated if the ["fair value model", "either the fair value or cost model", "cost model"] was used.
4. If the company revalued the building used as PPE to its market value 1,800,000 before the end of 2021, the difference 300,000 would be shown as ["unrealised gain under other comprehensive income", "gain on sale increasing the profit for the year", "gain on revaluation increasing the profit for the year"]
5. If the building was classified as investment property and revalued to its market value 1,800,000 before the end of 2021, the difference 300,000 would be shown as ["gain on sale increasing the profit for the year", "gain on revaluation increasing the profit for the year", "unrealised gain under other comprehensive income"]
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