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Transfers IP

The document discusses two problems involving transfers of properties to investment properties. Problem 1 involves transferring an owner-occupied building to an investment property, while Problem 2 involves transferring inventory land to an investment property. The document asks several questions regarding the accounting treatment and impact on financial statements of these transfers under both the cost and fair value models.

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213 views1 page

Transfers IP

The document discusses two problems involving transfers of properties to investment properties. Problem 1 involves transferring an owner-occupied building to an investment property, while Problem 2 involves transferring inventory land to an investment property. The document asks several questions regarding the accounting treatment and impact on financial statements of these transfers under both the cost and fair value models.

Uploaded by

shandierika.pitao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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TRANSFERS

Problem 1: Transfer from PPE to investment property


Magtuon Company owns a building purchased on January 1, 2024 for P100 million. The building
was used as the company’s head office. The building has an estimated useful life of 25 years. In
2018, the company transferred its head office and decided to lease out the old building.
Tenants began occupying the old building by the end of 2028. On December 31, 2028, the
company reclassified the building as investment property. The fair value on the date of
reclassification was P86 million.

1. If the investment property is to be carried using cost model, how much should be
recognized in the 2028 profit or loss as a gain or loss on transfer from owner-occupied
to investment property?
2. If the investment property is to be carried using cost model, how much should be
recognized in the 2028 other comprehensive income as a result of the transfer from
owner-occupied to investment property?
3. If the investment property is to be carried using fair value model, how much should be
recognized in the 2028 profit or loss as a gain or loss on transfer from owner-occupied
to investment property?

Problem 2: Transfer from inventory to investment property


On January 1, 2025, the SigegStudy Company bought a piece of land worth P2,600,000. The
SigegStudy Company’s business model is to buy and sell land. On December 31, 2028, the
SigegStudy Company decided to lease the land under an operating lease to another company.
The relevant estimated selling price and cost to sell of the inventories is as follows:

12/31/2025 12/31/2026 12/31/2027 12/31/2028


Selling price (Fair value) 2,650,000 2,750,000 2,800,000 2,880,000
Cost to sell 150,000 120,000 100,000 130,000
Net realizable value 2,500,000 2,630,000 2,700,000 2,750,000

1. What is the carrying amount of the inventory as of December 31, 2027 statement of
financial position?
2. How much should be initially recorded as cost of the investment property if it will be
accounted using the cost model?
3. How much is the gain on transfer to be recognized if the investment property will be
accounted using the cost model?
4. How much should be initially recorded as cost of the investment property if will be
accounted using the fair value model?
5. How much is the gain on transfer to be recognized if the investment property will be
accounted using the fair value model?

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