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CA Final · Financial Reporting · Ind AS 40 Investment Property

Lotus Developers Ltd buys a plot of land in Pune exclusively with a view to subsequent disposal in the near future after development and resale of flats. How should the plot be treated?

The plot is inventory under Ind AS 2. Ind AS 40 excludes property intended for sale in the ordinary course of business, including property acquired exclusively for disposal in the near future or for development and resale, so it is not investment property despite expected price gains.

  1. AInvestment property, since land is held for capital appreciation
  2. BProperty, plant and equipment under Ind AS 16
  3. CInventory under Ind AS 2, because property acquired exclusively for disposal in the near future or for development and resale is outside Ind AS 40Correct
  4. DInvestment property until construction begins, then inventory

Explanation

Ind AS 40 excludes property intended for sale in the ordinary course of business or under construction or development for such sale, giving as example property acquired exclusively for disposal in the near future or development and resale. Such property falls under Ind AS 2. Treating it as investment property because of expected appreciation is therefore wrong.

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