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CA Final · Financial Reporting · Ind AS 40 Investment Property

Hindustan Holdings Ltd acquires a company whose only significant asset is a commercial complex let to tenants. The company must decide how to account for the acquisition. Which statement is correct as per Ind AS 40?

Ind AS 103 must be consulted to decide whether the acquisition is a business combination. The Ind AS 40 guidance only distinguishes owner-occupied from investment property, and where a business combination includes an investment property, both Standards are applied separately.

  1. ABecause the asset is investment property, Ind AS 40 alone decides whether it is a business combination
  2. BInd AS 103 alone applies, and Ind AS 40 is irrelevant because the asset is acquired in a corporate wrapper
  3. CWhether it is a business combination is decided by reference to Ind AS 103; the owner-occupied versus investment property guidance in Ind AS 40 does not determine that, and where both apply, both Standards are applied separatelyCorrect
  4. DIf the property is let to tenants, the acquisition is always treated as an asset acquisition

Explanation

Ind AS 40 states judgement is needed to determine whether acquisition is of an asset, a group of assets or a business combination, and Ind AS 103 is referred to for that. Paragraphs 7-14 only address owner-occupied versus investment property. A transaction that is a business combination including investment property requires separate application of both Standards. Letting to tenants does not automatically make it an asset acquisition.

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