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CA Final · Financial Reporting · Ind AS 40 Investment Property

Bharat Infra Ltd, an Indian company preparing Ind AS financial statements, holds an office tower as investment property. The CFO, who is familiar with IAS 40, proposes to remeasure the tower at fair value each year with changes in profit or loss. What is the correct position under Ind AS 40?

The proposal is not permitted. Unlike IAS 40, which allows both the cost and fair value models, Ind AS 40 permits only the cost model for measurement after initial recognition, so the tower cannot be revalued through profit or loss.

  1. ANot permitted; Ind AS 40 permits only the cost model after initial recognitionCorrect
  2. BPermitted, as Ind AS 40 allows a free choice between cost and fair value models
  3. CPermitted only if the tower is let to a related party
  4. DRequired, as fair value is mandatory for properties in metro cities

Explanation

IAS 40 permits both cost and fair value models, but Ind AS 40 permits only the cost model for measurement after initial recognition, and the fair value model paragraphs were deleted. The CFO's proposal would therefore not comply. Choosing between models is a feature of IAS 40, not Ind AS 40.

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