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CA Final · Financial Reporting · Ind AS 40 Investment Property

Kaveri Textiles Ltd owns a building and a flat in a residential complex. The company lets the flat to its factory manager at a rent equal to the market rate. Which classification is correct under Ind AS 40?

The flat is owner-occupied property accounted for under Ind AS 16, not investment property. Ind AS 40 says property occupied by employees is outside its scope whether or not the employees pay rent at market rates, so market-rate rent does not make it investment property.

  1. AInvestment property, because market rent is charged
  2. BInventory under Ind AS 2, because it is let out regularly
  3. CInvestment property only if the manager is not a related party
  4. DOwner-occupied property under Ind AS 16, because it is occupied by an employeeCorrect

Explanation

Paragraph 9 lists property occupied by employees, whether or not they pay rent at market rates, as not investment property. It falls under Ind AS 16 as owner-occupied. Charging market rent, the key distractor, does not change this.

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