SERINGA LIMITED acquired two properties comprising land and office buildings five years ago from which rental income is earned. A third property comprising vacant land was acquired during the current financial year for R520 000 and it is currently held for an undetermined use. Transaction costs of R15 000 were incurred directly related to the purchase of the vacant land. Investment property is accounted for in accordance with the fair value model whilst the owner-occupied property is accounted for in accordance with the cost model. On the date of acquisition of this vacant land, there is clear evidence that the fair value of this property cannot be reliably determinable on a continuing basis since comparable market transactions are infrequent and alternative reliable estimates of fair value are not available. None of these properties have been disposed of during the current year. The financial director is unsure of how this vacant land should be classified and measured and has asked you, the financial accountant, to investigate this and report back to him.

REQUIRED: 

Prepare a response to this inquiry by the financial director about the classification and measurement of the vacant land with reference to IAS 40, Investment Property and IAS 16, Property, Plant and Equipment, where appropriate