Skip to content

CA Final · Financial Reporting · Ind AS 40 Investment Property

Narmada Textiles Ltd owns a building. It leases floors to its own employees' families and also to staff, and the employees occupy flats in it at market rent. Narmada's accountant argues that because rent at market rates is collected, the building is investment property. Which view is consistent with Ind AS 40?

The building is not investment property. Ind AS 40 treats property occupied by employees as owner-occupied, 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.

  1. AIt is investment property because market rent is charged
  2. BIt is investment property only if employees pay more than market rent
  3. CIt is not investment property, because property occupied by employees is owner-occupied whether or not they pay market rentCorrect
  4. DIt is classified as inventory because rent is received periodically

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. Market rent therefore does not make it investment property. The first option ignores this express rule.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 40 Investment Property shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 40 Investment PropertyFree diagnostic mock

More Ind AS 40 Investment Property questions