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The directors of Fome Co have decided to expand its operations overseas and acquired a building to use as a regional office in a foreign
The directors of Fome Co have decided to expand its operations overseas and acquired a building to use as a regional office in a foreign country on 1 July 20X3. The building has an expected useful life of 20 years and Fome Co's policy is to charge a full year's depreciation in the year of acquisition but none in the year of disposal. Amounts paid in the foreign country are denominated in the Kram (K) and Fome Co acquired the premises for its fair value of K6m. K2m was paid on 1 July 20X3 and the remaining K4m is due to be paid in two instalments on 1 July 20X4 and 1 July 20X5 (ignore discounting). Fome Co uses the cost model for property, plant and equipment but uses the fair value model for investment properties Relevant exchange rates are shown below: On 1 January 20X8 the property's carrying amount was $1.125m and its remaining useful life was re-assessed to be 20 years. At the same time, Fome Co reached an agreement with the overseas government to restore the land on which the building stood to its original condition at the end of the building's useful life. Fome Co estimates
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