Financial Reporting Quiz Time: 30 Mins
ABS Ltd acquired a property on 1 January 2014 at a cost of GHS400,000 and immediately occupied it as office premise. On acquisition, it was estimated to have a useful life of 50 years. Subsequent to its acquisition, the asset was measured at depreciated cost until 1 October 2009 when management of ABS decided to convert the building into an investment property (mainly for rentals). Following this decision, the property was fair valued at GHS 380,000. ABS adopted the fair value model for subsequent measurement of the investment property. At 31 December 2019, it was fair valued at GHS390,000.
Required: Account for the treatment of this property in the 2019 financial statements of ABS Ltd.
PLANT Ltd acquired a property on 1 January 2018 for its investment potential at a cost of GHS200,000. On acquisition, the property was estimated to have useful life of 40 years. PLANTadopted a policy of fair valuation for subsequent measurement. The fair value of the asset at 31 December 2019 was GHS 202,800. Effective 1 January 2019, management of PLANT decided to use the property as business premise. The original estimated useful life remained unchanged. Required: Account for the treatment of this property in the 2008 and 2009 financial statements of PLANT Ltd.
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