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CA Final · Financial Reporting · Ind AS 40 Investment Property

Bharat Developers Ltd bought a plot in Nashik exclusively to develop flats and resell them in the near future. It has no intention to earn rentals. How should the plot be accounted for?

The plot is inventory under Ind AS 2. Property acquired exclusively with a view to development and resale in the ordinary course of business is outside the scope of Ind AS 40, so it cannot be classified as investment property merely because land may appreciate.

  1. AAs investment property under Ind AS 40, since land is held for appreciation
  2. BAs property, plant and equipment under Ind AS 16
  3. CAs inventory under Ind AS 2, because it is held for development and resaleCorrect
  4. DAs a right-of-use asset under Ind AS 116

Explanation

Ind AS 40 excludes property intended for sale in the ordinary course of business or under construction or development for such sale, for example property acquired for development and resale. Such property falls under Ind AS 2. Treating it as investment property ignores this exclusion.

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