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CA Final · Financial Reporting · Ind AS 40 Investment Property

Mahadev Constructions Ltd buys land and a half-built tower in Nagpur exclusively to complete it and sell the flats quickly to buyers in the near future. How should the property be accounted for under the Standard?

The property is inventory under Ind AS 2. Ind AS 40 excludes property intended for sale in the ordinary course of business or under construction or development for such sale, including property acquired exclusively for near-term disposal or for development and resale.

  1. AAs inventory under Ind AS 2, as it is held for sale in the ordinary course of business or for development and resaleCorrect
  2. BAs investment property under Ind AS 40, because it is land and a building
  3. CAs property, plant and equipment under Ind AS 16, because construction is in progress
  4. DAs investment property, because capital appreciation is expected

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, including property acquired exclusively with a view to subsequent disposal in the near future or for development and resale. Such property is inventory under Ind AS 2. Expected appreciation alone does not make it investment property when the aim is quick resale.

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