Question 1

XYZ Inc. and its subsidiaries have provided you, their International Financial Reporting

Standards (IFRS) specialist, with a list of the properties they own:

i. Land held by XYZ Inc. for undetermined future use

ii. A vacant building owned by XYZ Inc. and to be leased out under an operating lease

iii. Property held by a subsidiary of XYZ Inc., a real estate firm, in the ordinary course of its

business

iv. Property held by XYZ Inc. for the use in production

v. A hotel owned by ABC Inc., a subsidiary of XYZ Inc., and for which ABC Inc. provides

security services for its guests belongings

Required

a. Advise XYZ Inc. and its subsidiaries as to which of the above-mentioned properties

would qualify under IAS 40 as investment properties. If they do not qualify, how

should they be treated under IFRS? (20 marks)

b. Identify and explain when investment property is recognized. (5 marks)

(Total 25 marks)