CA Final · Financial Reporting · Ind AS 40 Investment Property
Kaveri Textiles Ltd owns a Chennai building. Its head office staff occupy one floor and pay rent to the company at market rates. Which statement about the classification of the space occupied by employees is correct under Ind AS 40?
The space is owner-occupied property. Ind AS 40 states that property occupied by employees is not investment property, whether or not the employees pay rent at market rates, so it is accounted for under Ind AS 16 or Ind AS 116 and not under Ind AS 40.
- AIt is investment property because employees pay market rent
- BIt is investment property only if the rent is above market rate
- CIt is owner-occupied property, whether or not employees pay rent at market ratesCorrect
- DIt is inventory because rent is received in the ordinary course
Explanation
Ind AS 40 lists property occupied by employees (whether or not they pay rent at market rates) as owner-occupied property, dealt with under Ind AS 16 or Ind AS 116. The market-rent option is therefore wrong. Inventory applies only to property held for sale in the ordinary course.
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