IFRS Standards: Investment Property Classification Quiz

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What are the two models that an entity may choose for recognizing investment property after recognition?

Cost model and fair value model

Under the cost model, how are investment properties held?

At cost less accumulated depreciation

Under the fair value model, how often does the entity remeasure its investment properties?

To fair value each year

In what circumstances should an entity adopt the cost model for investment property?

If it is impossible to measure the fair value of an individual investment property reliably Signup and view all the answers

When can transfers to or from investment property be made?

If there is a change of use Signup and view all the answers

What is the treatment of depreciation under the fair value model for investment properties?

No depreciation is charged Signup and view all the answers

How are gains and losses on revaluation of investment properties treated under the fair value model?

Reported in the statement of profit or loss Signup and view all the answers

Which standard applies to property held for use in the production or supply of goods or services?

IAS 16 Property, Plant and Equipment Signup and view all the answers

What should the cash flow projections be based on according to IAS 36?

Reasonable assumptions and the most recent budgets and forecasts Signup and view all the answers

How should management extrapolate from earlier budgets when estimating cash flows?

Using a steady, declining, or zero growth rate Signup and view all the answers

What should the discount rate used to calculate value in use reflect according to IAS 36?

The time value of money and the risks specific to the asset Signup and view all the answers

What are the options to compare against carrying amount in an impairment test?

Fair value less costs to sell and Value in use Signup and view all the answers

What is the finance director asking the accountant to perform for JonJon assets?

Impairment test for the year ended 31 December 20X5 Signup and view all the answers

What was the condition of realised cash flows for JonJon in 20X5 compared to forecasted cash flows?

Negative and far below forecasted cash flows for that period Signup and view all the answers

When should expenditure to improve or enhance an asset be excluded from cash flow projections?

For periods in excess of five years Signup and view all the answers

What should management assess when investigating differences between forecast and actual cash flows?

The accuracy of their budgets Signup and view all the answers

When should an entity start amortising an intangible asset?

Amortisation starts when the asset is available for use. Signup and view all the answers

What method is typically used for amortisation of intangible assets with a finite useful life?

The straight-line method with a zero residual value should be used. Signup and view all the answers

How should an asset with an indefinite useful life be treated?

An asset with an indefinite useful life should not be amortised, but be subject to an annual impairment review. Signup and view all the answers

How are gains and losses on remeasurement to fair value of intangible assets accounted for?

They are accounted for in the same way as revaluation gains and losses of tangible assets. Signup and view all the answers

In the case of the Our Sports brand, why was it valued at $20 million by the directors?

Based on the cash flow projections for the next five years of the series. Signup and view all the answers

What action should be taken if an intangible asset's useful life is assessed as finite?

It should be amortised on a systematic basis over that life. Signup and view all the answers

What is the key difference in treatment between intangible assets with finite and indefinite useful lives?

Assets with finite useful lives are amortised, while assets with indefinite useful lives are not amortised but subject to annual impairment review. Signup and view all the answers

What triggers the start of the amortisation process for an intangible asset?

Amortisation starts when the asset is available for use. Signup and view all the answers

What is the depreciation charge for the year ended 31 December 20X5 for the asset with a carrying amount of $80,000?

$20,000 Signup and view all the answers

When should Clock Government grants be recognized?

When there is reasonable assurance that the entity will comply with any conditions attached and the grant will be received. Signup and view all the answers

What are the two options Clock could choose regarding the $1 million grant due from the local government?

Reduce the cost of the building by $1 million or Recognize deferred income of $1 million. Signup and view all the answers

What will be the depreciation charge in profit or loss for the year ended 31 December 20X1 if Clock chooses to reduce the cost of the building by $1 million?

$15,000 Signup and view all the answers

What will be the carrying amount of the building as at 31 December 20X1 if Clock recognizes deferred income of $1 million?

$8,985,000 Signup and view all the answers

How long will the building be depreciated over if Clock chooses to reduce the cost of the building by $1 million?

50 years Signup and view all the answers

What is the revised life for the asset with a carrying amount of $80,000?

4 years Signup and view all the answers

What is the cost of the building after reducing it by $1 million?

$9 million Signup and view all the answers

What is the total impairment charged to profit or loss?

$650,000 Signup and view all the answers

How much was the asset written down to in the year ended 31 December 20X2?

$16,000 Signup and view all the answers

What will be the depreciation charge per annum in future periods after the write-down in 20X2?

$2,000 Signup and view all the answers

What happened in the year ended 31 December 20X5 with regards to the recoverable amount of the asset?

nil Signup and view all the answers

What was the depreciation historical cost in Year 5?