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On 1 July 2 0 X 1 Jack Furnishing Pte Ltd . ( JFL ) purchased two buildings: Building A for $ 1 2 million
On July X Jack Furnishing Pte LtdJFL purchased two buildings: Building A for $ million and the adjacent Building B for $ million. The company also paid a legal fee of $ and agents commission of $ to complete the transfer of the title deeds for both buildings. The decision for the purchase was the result of a favourable market study which the company paid $ for on June X Both buildings have useful of years with zero residual value. The company adopts the straightline method for depreciation of its noncurrent assets. At the same time, the company was able to establish that the fair market value of the two buildings on July X were as follows:
Building A: $
Building B: $
The company intends to use Building A for its operation and to hold Building B for capital appreciation.
On October X the company moved its operation to Building B and put Building A up for sales. The company adopts the cost model for Building B from this point onward.
The fair value and valueinuse of the buildings are given as below:
tableDateFair Value $Value In Use $ December XBuilding A
Assess the information given, discuss and illustrate on the various possible accounting treatments under the International Financial Reporting Standards for the two buildings for the year X and X The company has initially not decided on which model to use for PPE but will adopt the fair value model for investment property. Workings and explanations must be clearly shown, and all necessary journal entries to be provided. The company does not practice reserve transfer for the revaluation model. When assets are adjusted for revaluations, the company adopts the elimination method. The company financial year ends on December. Carrying amount of the assets must be clearly stated at the end of each reporting period.
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