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CA Final · Financial Reporting · Ind AS 40 Investment Property

Ranjit Industries Ltd is evaluating whether to apply the fair value model to its commercial complex in Gurugram that it classifies as investment property, as permitted under IAS 40 for many global companies. Which statement is correct under Ind AS 40 for Ranjit's subsequent measurement?

Ranjit must use the cost model only. Unlike IAS 40, which allows both cost and fair value models, Ind AS 40 permits only the cost model for measurement after initial recognition, and its fair value model paragraphs have been deleted.

  1. ARanjit may choose either the cost model or the fair value model as an accounting policy
  2. BRanjit must use the fair value model with changes recognised in profit or loss
  3. CRanjit must use the revaluation model with changes in other comprehensive income
  4. DRanjit must use only the cost model, as Ind AS 40 permits only the cost model for measurement after initial recognitionCorrect

Explanation

Per the comparison with IAS 40, IAS 40 permits both models whereas Ind AS 40 permits only the cost model, and the paragraphs on the fair value model are deleted. Ranjit therefore cannot adopt fair value measurement, although fair value is still to be disclosed.

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