The management of DESMUN (PTY) LTD decided that the office building used to house its staff will be leased to tenant as a result of the company decided to implement a hybrid working policy. Management concluded an agreement with a tenant who will occupy 60% of the building. The lease agreement includes a clause where the company will be responsible for the service costs such as repairs & maintenance, network/wifi-connectivity and the utility bill.

Required:

(a) Discuss how the office building should be recognised in the accounting financial statements in compliance with the accounting standards after the decision to lease the property was implemented.

(b) Discuss how the reclassification, if any, should be implemented as a result of the office building being used for multiple purposes (generate rental income and owner occupied).

(c) Discuss how the service costs should be recognised by the company as the share of the tenant is included in the rental payment.