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CA Final · Financial Reporting · Ind AS 40 Investment Property

Kaveri Infra Ltd buys a plot of land and a half-built tower, intending to complete construction and sell the flats to buyers in the near future as part of its real estate business. How should Kaveri classify the property?

The property should be classified as inventory under Ind AS 2. Ind AS 40 places outside its scope property intended for sale in the ordinary course of business or under construction or development for such sale, which describes Kaveri's tower and plot.

  1. AInvestment property under Ind AS 40, because it is land and buildings
  2. BProperty, plant and equipment under Ind AS 16, because it is under construction
  3. CInventory under Ind AS 2, because it is held for sale in the ordinary course or being developed for such saleCorrect
  4. DInvestment property, because capital appreciation is expected until sale

Explanation

Ind AS 40 excludes property intended for sale in the ordinary course of business or in the process of construction or development for such sale; that falls under Ind AS 2. Kaveri intends to develop and sell flats, so it is inventory. Treating it as investment property ignores this scope exclusion.

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