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Questions and Answers
Investment Property includes land or buildings held for rentals or capital appreciation.
Investment Property includes land or buildings held for rentals or capital appreciation.
True
Owner-occupied property is defined as property held for rental income.
Owner-occupied property is defined as property held for rental income.
False
Transaction costs must be excluded from the initial measurement of Investment Property.
Transaction costs must be excluded from the initial measurement of Investment Property.
False
All costs related to self-constructed properties are recognized as 'Construction in Progress' until completed.
All costs related to self-constructed properties are recognized as 'Construction in Progress' until completed.
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Investment Property is derecognized only when it is sold or permanently withdrawn from use.
Investment Property is derecognized only when it is sold or permanently withdrawn from use.
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An asset is considered impaired when its recoverable amount exceeds its carrying amount.
An asset is considered impaired when its recoverable amount exceeds its carrying amount.
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A retention fee is a type of transaction cost that can be included in the initial measurement of an Investment Property.
A retention fee is a type of transaction cost that can be included in the initial measurement of an Investment Property.
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Transfers to or from Investment Property occur only with evidence of a change in use.
Transfers to or from Investment Property occur only with evidence of a change in use.
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Study Notes
Investment Property - Government Accounting
- Investment property is land or buildings (or part of a building or both) held to generate rental income, or for capital appreciation, or both.
- Owner-occupied property is held for use in producing goods or services or for administrative purposes.
Cost Model - Initial and Subsequent Measurement
- Investment property (IP) is initially measured at cost.
- Transaction costs are included in the initial measurement.
- Cost includes purchase price and directly attributable expenditures.
Acquisition - Cash Purchase
- Example: Entity A buys land for ¥1,000,000. Professional fees and transfer taxes total ¥50,000.
- Accounting entry: Debit Investment Property, Land ¥1,050,000; Credit Cash-Modified disbursement system (MDS), Regular ¥1,050,000.
Non-exchange Transaction
- Example: Entity A receives a piece of land as an unconditional donation with a fair value of £2,000,000.
- Accounting entry: Debit Investment Property, Land £2,000,000; Credit Income from Grants and Donations in Kind £2,000,000.
Self-Constructed Property
- If IP is self-constructed (by contract or by administration), all costs are recognised as "Construction in Progress" until completion.
- Upon completion, these costs are transferred to the "Investment Property" account when the recognition criteria are met.
- Example: Entity A constructs a building for rent income. Contract price is P11,200,000. Advance payment is 15% of the contract price. Retention fee is 10% of the progress billing.
Transfer
- Transfers to or from IP occur only when there's a change in use.
- Examples include commencement of owner-occupation, development for sale, end of owner-occupation, or commencement of an operating lease.
Derecognition of Investment Property
- IP is derecognised on disposal or when permanently withdrawn from use, with no future economic benefits.
Gains/Losses
- Example: A building, held as IP, is sold for £5,000,000. Original cost was £4,000,000. Accumulated depreciation is £500,000. Impairment allowance is £100,000.
- Accounting entries: Debit Cash-Collecting Officers £5,000,000; credit Investment Property, Buildings £4,000,000, credit Gain on the sale of investment Property £1,600,000, etc.
Compensation of 3rd Parties
- Example: A building, held as IP, is destroyed by fire. Original cost was £4,000,000. Accumulated depreciation is £500,000. Impairment allowance is £100,000.
- Accounting entries: Debit Loss of assets £3,400,000; credit Investment Property, Buildings £4,000,000, etc.
Due from Government-Owned or Controlled Corporations
- Example: Receivable due from GSIS Insurance Fund is ¥1,500,000.
- Accounting entries: Debit to an appropriate account; credit to Other Service Income.
Impairment
- An asset is impaired when its carrying amount exceeds its recoverable amount (due to a fall in market value).
- Impairment loss = Carrying amount less Recoverable amount.
- Recoverable amount = Higher of fair value less cost to sell and value in use (present value of estimated future cash flows).
Adjusted Depreciation
- Depreciation expense = Revised carrying amount - residual value / remaining estimated useful life.
- Example: Investment property, buildings, less accumulated depreciation, impairment loss, and revised carrying amount.
- Accounting entry: Debit Depreciation-Investment Property; credit Accumulated Depreciation-Investment Property, Buildings.
Reversal
- Entities assess whether an impairment loss previously recognized no longer exists or has decreased.
- If so, they estimate the asset's recoverable amount.
Calculations (Examples from Slides)
- Detailed calculations (e.g., for estimated reversal) are presented in the slides.
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Description
This quiz covers key concepts related to investment property in government accounting, including definitions, measurement models, and accounting entries for acquisition. Test your knowledge on initial and subsequent measurements and non-exchange transactions related to investment properties.
