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CA Final · Financial Reporting · Ind AS 40 Investment Property

Ganga Developers Ltd acquired land and plans to develop it and sell the developed plots in the near future. Which classification is appropriate under Ind AS 40 and related standards?

The land is inventory under Ind AS 2. Ind AS 40 excludes property intended for sale in the ordinary course of business or being developed for such sale, including property acquired exclusively for near-future disposal or for development and resale, so it is not investment property.

  1. AInvestment property, because land is held for capital appreciation
  2. BInventory under Ind AS 2, because property acquired exclusively with a view to subsequent disposal in the near future or for development and resale is outside Ind AS 40Correct
  3. CProperty, plant and equipment under Ind AS 16, because the land is held for future use
  4. DInvestment property until development begins, then inventory

Explanation

Ind AS 40 excludes property intended for sale in the ordinary course of business, or being developed for such sale, including property acquired exclusively for disposal in the near future or for development and resale. Such property is covered by Ind AS 2. Holding land for appreciation does not apply as the intent is resale in the ordinary course.

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