Question 2

The accounting treatment of investment properties is prescribed by IAS 40/ MFRS 140. Durian Berhad owns an office building which it uses for administrative purposes with a depreciated historical cost of RM2 million. At 1 April 2015, it had a remaining life of 20 years. The company adopts the revaluation model for its office building. After a reorganisation on 1 October 2015, the property was let to a third party and reclassified as an investment property applying Durian Berhads policy of the fair value model. An independent valuer assessed the property to have a fair value of RM2.3 million at 1 October 2015, which had risen to RM2.34 million at 31 March 2016.

Required:

(i) Explain the accounting treatment and prepare journal entries to record the transactions relating to the transfer on 1 October 2015 and the change in value on 31 March 2016.

(ii) Prepare extracts from Durian Berhads Statement of Comprehensive Income and Statement of Financial Position for the year ended 31 March 2016 in respect to the above property.