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CA Final · Financial Reporting · Ind AS 40 Investment Property

Sundaram Holdings Ltd reports under Ind AS. It owns a commercial building and has chosen to carry it at fair value, crediting annual fair value gains to profit or loss, on the basis that IAS 40 allows this. Which statement correctly describes the position under Ind AS 40 for measuring investment property after initial recognition?

Ind AS 40 permits only the cost model for measuring investment property after initial recognition. Unlike IAS 40, the fair value model paragraphs were deleted from the Indian standard, so an entity cannot choose fair value accounting through profit or loss for its investment properties.

  1. AOnly the cost model is permitted, as Ind AS 40 does not include the fair value modelCorrect
  2. BEither the cost model or the fair value model may be chosen as an accounting policy
  3. CThe fair value model is mandatory for properties whose value exceeds Rs 10 crore
  4. DThe fair value model is permitted only for properties held to earn rentals and not for capital appreciation

Explanation

Ind AS 40 differs from IAS 40 in that the fair value model paragraphs have been deleted, so only the cost model is permitted after initial recognition. Sundaram's fair value policy is therefore not allowed. The option allowing a free choice reflects IAS 40, not Ind AS 40.

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