Question

Pro Limited own an office block. The office block had cost N$1,000,000.00 on 1 January 2014. Its residual value is estimated to be nil and total useful life is estimated to be 10 year respectively (both estimates have remained unchanged). Pro Limited had occupied the office block from date of purchase until 30 June 2015. On 30 June 2015, Pro Limited moved out of the office block and thereafter rented it to tenants under short term operating leases. The fair value of the office block on this date was N$900 000. The fair value of the office block was N$800 000 on 31 December 2014 and N$1,200,000 on 31 December 2015 Pro measures owner-occupied property using the cost model and investment property using the fair value model Required: Journalise the entries relating to the office block in the accounting records of Pro Limited for the year ended 31 December 2015

Answer 1

In the Books of Pro Limited
Journal Entries
Date	Particulars	Debit	Credit
30-06-15	Depreciation A/c Dr. (See note 1)	50,000
	To Office Block		50,000
	(Depreciation provided on office block upto June 30,2015)
30-06-15	Office Block A/c Dr. (see note 2)	50,000
	To Revaluation Surplus		50,000
	(routed through OCI included in equity)
	(Difference between carrying amount and fairvalue is recognised in OCI)
31-12-15	Office Block A/c Dr. (see note 3)	300,000
	To Profit and loss A/c		300,000
	(Entry to measure Office Block at fair value)
Data>>>
Date	Particulars	Cost	Fair Value
01-01-14	Office block	1,000,000
	Useful life - 10 years
	Depreciation for the year ending 31/12/2014	100,000
31-12-14	Book Value / Fair value	900,000	800,000
	Depreciation till 30/06/2015	50,000
30-06-15	Book Value / Fair value	850,000	900,000
31-12-15			1,200,000

Notes >>>

Note 1. (IAS 40.61-62) When an owner-occupied property becomes an investment property, IAS 16 or IFRS 16 is

applied up to the date of the transfer. Any difference between carrying amount and fair value

at the transfer date is treated as a revaluation under IAS 16

Note 2. [IAS 16.39]. If a revaluation results in an increase in value, it should be credited to other

comprehensive income and accumulated in equity under the heading "revaluation surplus"

unless it represents the reversal of a revaluation decrease of the same asset previously

recognised as an expense, in which case it should be recognised in profit or loss.

Note 3. [IAS 40.35] Gains or losses arising from changes in the fair value of investment property must be

included in net profit or loss for the period in which it arises.