LU 6: INVESTMENT PROPERTY - IAS 40: (PLEASE IGNORE REVALUATIONS ON DEPRECIABLE ASSETS) QUESTION 6.1 NewsNetwork Ltd is a news publishing company, situated in the northern suburbs of Johannesburg. The company has a December year-end. The following details are available regarding certain assets of the company: Printing plant NewsNetwork Ltd owns a printing plant that is used to print all its publications. The property was purchased on 30 September 20.10 for R3 000000 (land: R1 000000 ; building: R2 000000 ). The property was available for use, as intended by management, on acquisition date and was also brought into use on this date. A residual value of R500 000 was allocated to the building. The useful life of the building was estimated to be 25 years. On 31 December 20.11, the property was revalued for the first time. The net replacement value of this property was determined to be R3 550000 (land: R1 250 000; building: R2 300 000). The residual value and remaining useful life of the property remained unchanged. No decision has been made by the company to sell this property. Administration building This property was bought by NewsNetwork Ltd for its own administrative purposes on 1 February 20.11 for R1 400000 (land: R500 000; building: R900 000). The property was available for use, as intended by management, on acquisition date and was also brought into use on this date. On 1 February 20.11, it was determined that the building had an estimated useful life of 30 years, with no residual value. The estimated useful life and residual value remained unchanged. During October 20.11, NewsNetwork Ltd was approached by another company about the possibility of leasing the administrative building from NewsNetwork Ltd. After discussions, the board of directors of NewsNetwork Ltd changed their original intension regarding the building and vacated the building on 31 October 20.11. The building was ready to be leased out from 1 November 20.11. A six year operating lease contract, effective from 1 November 20.11, was concluded. NewsNetwork Ltd will, in future, rent offices for its own administrative purposes. The respective net replacement values and fair values of this administrative building were as follows: 31 October 20.11 31 December 20.11 Land Building R530000920000R540000935000 Office block NewsNetwork Ltd owns an office block which is leased out to CDDNews Ltd for their administrative purposes. The property was purchased on 1 March 20.11 for R1 600000 (land: R600 000 ; building: R1 000000 ). The fair value of this property on 31 December 20.11 was determined to be R2 050000 (land: R700 000; building: R1 350000 ). FAC1601/QUESTION BANK Additional information: 1. It is the accounting policy of the company to account for investment property according to the fair value model. 2. It is the accounting policy of the company to provide for depreciation according to the straight-line method over the assets' estimated useful lives. Depreciation for the year is calculated on the most recent revalued amounts. 3. All the net replacement values and fair values of assets were determined by Mr Nkuli, an independent sworn appraiser. Mr Nkuli has recent experience in the location and category of the property being valued. The net replacement values and the fair values were FAC1601/QUESTION BANK Additional information: 1. It is the accounting policy of the company to account for investment property according to the fair value model. 2. It is the accounting policy of the company to provide for depreciation according to the straight-line method over the assets' estimated useful lives. Depreciation for the year is calculated on the most recent revalued amounts. 3. All the net replacement values and fair values of assets were determined by Mr Nkuli, an independent sworn appraiser. Mr Nkuli has recent experience in the location and category of the property being valued. The net replacement values and the fair values were determined with reference to current market prices on an arm's length basis of similar properties in the same area. 4. Assume all amounts to be material. REQUIRED Disclose the following notes to the annual financial statements NewsNetwork Ltd for the year ended 31 December 20.11: (b) Property, plant and equipment (c) Investment property (d) Accounting policy notes are not required. (e) Show all calculations. (f) Round off all amounts to the nearest rand. (g) Ignore comparative information. (h) Ignore all tax and VAT implications. Your answer must comply with International Financial Reporting Standards (IFRS). LU 6: INVESTMENT PROPERTY - IAS 40: (PLEASE IGNORE REVALUATIONS ON DEPRECIABLE ASSETS) QUESTION 6.1 NewsNetwork Ltd is a news publishing company, situated in the northern suburbs of Johannesburg. The company has a December year-end. The following details are available regarding certain assets of the company: Printing plant NewsNetwork Ltd owns a printing plant that is used to print all its publications. The property was purchased on 30 September 20.10 for R3 000000 (land: R1 000000 ; building: R2 000000 ). The property was available for use, as intended by management, on acquisition date and was also brought into use on this date. A residual value of R500 000 was allocated to the building. The useful life of the building was estimated to be 25 years. On 31 December 20.11, the property was revalued for the first time. The net replacement value of this property was determined to be R3 550000 (land: R1 250 000; building: R2 300 000). The residual value and remaining useful life of the property remained unchanged. No decision has been made by the company to sell this property. Administration building This property was bought by NewsNetwork Ltd for its own administrative purposes on 1 February 20.11 for R1 400000 (land: R500 000; building: R900 000). The property was available for use, as intended by management, on acquisition date and was also brought into use on this date. On 1 February 20.11, it was determined that the building had an estimated useful life of 30 years, with no residual value. The estimated useful life and residual value remained unchanged. During October 20.11, NewsNetwork Ltd was approached by another company about the possibility of leasing the administrative building from NewsNetwork Ltd. After discussions, the board of directors of NewsNetwork Ltd changed their original intension regarding the building and vacated the building on 31 October 20.11. The building was ready to be leased out from 1 November 20.11. A six year operating lease contract, effective from 1 November 20.11, was concluded. NewsNetwork Ltd will, in future, rent offices for its own administrative purposes. The respective net replacement values and fair values of this administrative building were as follows: 31 October 20.11 31 December 20.11 Land Building R530000920000R540000935000 Office block NewsNetwork Ltd owns an office block which is leased out to CDDNews Ltd for their administrative purposes. The property was purchased on 1 March 20.11 for R1 600000 (land: R600 000 ; building: R1 000000 ). The fair value of this property on 31 December 20.11 was determined to be R2 050000 (land: R700 000; building: R1 350000 ). FAC1601/QUESTION BANK Additional information: 1. It is the accounting policy of the company to account for investment property according to the fair value model. 2. It is the accounting policy of the company to provide for depreciation according to the straight-line method over the assets' estimated useful lives. Depreciation for the year is calculated on the most recent revalued amounts. 3. All the net replacement values and fair values of assets were determined by Mr Nkuli, an independent sworn appraiser. Mr Nkuli has recent experience in the location and category of the property being valued. The net replacement values and the fair values were FAC1601/QUESTION BANK Additional information: 1. It is the accounting policy of the company to account for investment property according to the fair value model. 2. It is the accounting policy of the company to provide for depreciation according to the straight-line method over the assets' estimated useful lives. Depreciation for the year is calculated on the most recent revalued amounts. 3. All the net replacement values and fair values of assets were determined by Mr Nkuli, an independent sworn appraiser. Mr Nkuli has recent experience in the location and category of the property being valued. The net replacement values and the fair values were determined with reference to current market prices on an arm's length basis of similar properties in the same area. 4. Assume all amounts to be material. REQUIRED Disclose the following notes to the annual financial statements NewsNetwork Ltd for the year ended 31 December 20.11: (b) Property, plant and equipment (c) Investment property (d) Accounting policy notes are not required. (e) Show all calculations. (f) Round off all amounts to the nearest rand. (g) Ignore comparative information. (h) Ignore all tax and VAT implications. Your answer must comply with International Financial Reporting Standards (IFRS)