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CA Final · Financial Reporting · Ind AS 40 Investment Property

Mahalaxmi Holdings Ltd acquired a mall in Mumbai together with its tenant contracts, a property management team and processes to operate it. Management says that because the mall meets the definition of investment property, Ind AS 40 alone applies and Ind AS 103 is irrelevant. What does Ind AS 40 require?

Whether the acquisition is a business combination must be determined by referring to Ind AS 103. Ind AS 40's classification guidance does not settle that question, so where the deal is a business combination including investment property, both Ind AS 103 and Ind AS 40 are applied separately.

  1. AOnly Ind AS 40 applies, as the asset is investment property
  2. BOnly Ind AS 103 applies, and Ind AS 40 is disregarded entirely
  3. CJudgement is needed on whether it is a business combination, using Ind AS 103, and where it is one both Standards are applied separatelyCorrect
  4. DThe acquisition is always treated as an asset acquisition if the property is a building

Explanation

Ind AS 40 states that paragraphs 7-14 only decide between owner-occupied and investment property, not whether an acquisition is a business combination. Ind AS 103 must be referred to for that, and a transaction that is a business combination and includes investment property needs separate application of both Standards.

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