Question

In: Accounting

Harta Bhd Bhd had used an office building for administrative purposes with a depreciated cost of...

Harta Bhd Bhd had used an office building for administrative purposes with a depreciated cost of historical cost of RM3.6 million on 1 April 2019 with a remaining life of 20 years.
There were some reorganizations to Harta’s properties during the year of 2019. The office building was rented to a third party and reclassified as an investment property applying the fair value on 1 October 2019. Harta Bhd had consulted an independent professional assessor valued on the property. The fair value of the building was valued at RM4.14 million at 1 October 2019 by the assessor. This value rose further to RM4.212 million at 31 March 2020.
Discuss the accounting treatment of the above scenarios in accordance to the relevant MFRS. Show the effects to the financial statements of Kaya Bhd.
Marks as allocated.

Solutions

Expert Solution

Harta bhd bhd
In Rm
Carrying amount as on 1st october 2019 In millions
historical cost as on 1st april 2019 = 3.6
Useful life = 20
Depreciation yearly = 3.6/20
= 0.18
half yearly depreciation = 0.18/2
= 0.09
Therefore Carrying amount as on 1st oct 2019 = 3.6-0.09
= 3.51
As per MFRS, we have to initially measure Investment property as cost
therefore as on 1st october we have to measure Investment property of
3.51 Millions
After initially recognition we can measure Investment property on fair value
therefore as on 31st march 2020 Investment property would be shown as 4.212 Millions
and excess fair value from cost should be shown in profit and loss account
Cost as on 31st march 2020 3.6-0.18
= 3.42
Amount to be shown in credit of P&L = 4.212-3.42
= 0.792

ekkarill92 answered 3 years ago
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