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IAS 40Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 40L1 · Fundamental

Five situations: investment property, owner-occupied property or inventory

3 documents5 tasks≈ 40 min
0 / 6 items completed
Standards
IAS 40 — Investment Property
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Atelier Foncier SA (fictitious entity) closes its books on 31 December 20X5. The accounting department must classify five properties in its register: some are investment property, others are owner-occupied property or inventory. A building acquired in 20X5 is partly let and partly occupied.

Your assignment

Classify each of the five situations; explain the treatment of a mixed-use property whose portions can be sold separately; record the acquisition of situation 5 (case data) and present its effect; conclude.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Fundamental level: the method, help and references are shown.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 3 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 6) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

3 documents: open each one to read it.

Document 1Table

Property register

Property register at 31 December 20X5. Situation 1: land acquired in 20X3, held for long-term capital appreciation, with no future use decided. Situation 2: office building wholly let to third parties under operating leases. Situation 3: dwellings under construction that the entity, as a developer, will sell to its customers in the ordinary course of business. Situation 4: the entity's head office, wholly occupied by its administrative departments. Situation 5: building acquired on 2 May 20X5, of which two floors are let to third parties and two floors are occupied by the entity; each floor is a separate lot that can be sold separately.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Total price of situation 5€1,500,000.00
Part of the price allocated to the let floors€900,000.00
Part of the price allocated to the occupied floors€600,000.00
Training budget 20X6€8,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort3

  • Property register

  • Deed of acquisition of situation 5

  • Training programme

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      5 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Classify each of the five situations (investment property, owner-occupied property, inventory).

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      2. Task 2Analysis

        How should a property be treated when one part is let and one part is occupied, if the portions can be sold separately?

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      3. Task 3Journal entries

        Record the acquisition of situation 5.

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        3. Line 3

        TotalsDebit0Credit0

      4. Task 4Effects on the financial statements

        What is its effect on the financial statements?

        For each financial statement, state the line affected, the direction and the amount.

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

      5. Task 5Conclusion

        Write the conclusion.

        Write a conclusion that cites the facts and the treatment chosen.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 6).

      Normative references

      • IAS 40 §5
      • IAS 40 §7
      • IAS 40 §8
      • IAS 40 §9
      • IAS 40 §10