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CA Final · Financial Reporting · Ind AS 40 Investment Property

Orchid Estates Ltd leases out a warehouse to another entity under a finance lease. Orchid is the lessor. Which statement about the warehouse is correct under the scope of Ind AS 40?

The warehouse is not investment property. Ind AS 40 specifically lists property leased to another entity under a finance lease as outside its scope, so the earning of rentals does not bring it within the Standard.

  1. AIt is investment property because rentals are earned
  2. BIt is investment property only if the lease term exceeds ten years
  3. CIt is not investment property, as property leased to another entity under a finance lease is outside Ind AS 40Correct
  4. DIt is owner-occupied property under Ind AS 16

Explanation

Ind AS 40 lists property leased to another entity under a finance lease among items that are not investment property and are outside its scope. Earning rentals alone does not qualify it. Owner-occupied classification is also wrong as the entity does not use it.

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