IAS 40Workpapers (Step 4 of 5)

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WorkpaperIAS 40 — Investment PropertyL2 · L3

Initial cost and capitalisation of an investment property

2 missions8 sections to document45 min

Prepared by: AI-assisted draft
Reviewed by: Not reviewed — human review required
Status: Published

Objective of the workpaper

For each acquisition (one instance per property), describe the transaction, enter the deferred price, the rate and period of the credit, the costs incurred and the excluded costs, compute the cash price equivalent, the capitalisable costs and the initial cost, then prepare the entries (capitalised costs, cash price, excluded costs expensed, interest for the period) and their effect on the financial statements.

8 sections · 19 blocks · 3 calculations · 4 entries

IAS 40
IAS 40 §18
IAS 40 §19
IAS 40 §20
IAS 40 §21
IAS 40 §23
IAS 40 §24

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity

Acquisition of a building: initial cost, excluded costs and deferred payment

Case tasks documented here

Compute the cash price equivalent of the deferred price.
Compute the capitalisable costs.
Compute the initial cost of the building.
Record the acquisition, the excluded costs and the interest of the first year.

Inputs

Transaction: property acquired, seller, date and payment terms
Text
IMMEUBLE_DE_BUREAUX_PAIEMENT_DIFFERE
Agreed price, payable at the end of the credit period
Number
2,205,000
Rate of the seller's credit (in %)
Number
5 %
Credit period (years)
Number
2 years
Costs incurred other than the price (fees, taxes, start-up, losses)
Number
110,000
Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Number
30,000
Interest expense of the first year of the credit
Number
100,000

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis of the costs

Analysis

IAS 40IAS 40 §18IAS 40 §19IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Points reviewed: criteria, direct costs, excluded costs, deferred payment, maintenance and replacement
ChecklistRequired
- Recognition criteria applied to the costs when they are incurred
- Price and directly attributable expenditure identified
- Costs excluded from the initial cost identified
- Deferred payment: cash price equivalent used
- Day-to-day servicing expensed, replacement of parts capitalised

Cost calculations

Calculations

IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Cash price equivalent: deferred price discounted
Calculation
2,000,000
Agreed price, payable at the end of the credit period ; Rate of the seller's credit (in %) ; Credit period (years)
Capitalisable costs: costs incurred − excluded costs
Calculation
80,000
Costs incurred other than the price (fees, taxes, start-up, losses) ; − Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Initial cost: cash price + capitalisable costs
Calculation
2,080,000
Cash price equivalent: deferred price discounted ; Capitalisable costs: costs incurred − excluded costs

Journal entries

Entries

Directly attributable costs capitalised
Entry
Account Debit Credit
Investment property 80,000
Cash 80,000
Acquisition with deferred payment (cash price equivalent)
Entry
Account Debit Credit
Investment property 2,000,000
Financial liability 2,000,000
Excluded costs recognised as expenses
Entry
Account Debit Credit
Operating expense 30,000
Cash 30,000
Interest for the period on the seller's credit
Entry
Account Debit Credit
Interest expense 100,000
Financial liability 100,000

Account	Debit	Credit
Investment property	80,000
Cash		80,000

Account	Debit	Credit
Investment property	2,000,000
Financial liability		2,000,000

Account	Debit	Credit
Operating expense	30,000
Cash		30,000

Account	Debit	Credit
Interest expense	100,000
Financial liability		100,000

Conclusion

Initial cost and treatment of the costs submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Capitalised costs entry balancedPass
Deferred price entry balancedPass
Excluded costs entry balancedPass
Interest entry balancedPass

Assets: 1,970,000
Liabilities: 2,100,000
Profit or loss: -130,000
OCI: 0
Equity: -130,000

File and entity

File of an investment property portfolio: classification, measurement, transfers and disclosures

Case tasks documented here

Compute the cash price equivalent of the price of N.
Compute the capitalisable costs of N.
Compute the initial cost of N.
Record the acquisition of N and its 20X5 interest, the changes of P and Q, the transfer of T, the disposal of S and the depreciation of V.

Inputs

Transaction: property acquired, seller, date and payment terms
Text
IMMEUBLE_N_PAIEMENT_DIFFERE
Agreed price, payable at the end of the credit period
Number
1,102,500
Rate of the seller's credit (in %)
Number
5 %
Credit period (years)
Number
2 years
Costs incurred other than the price (fees, taxes, start-up, losses)
Number
70,000
Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Number
20,000
Interest expense of the first year of the credit
Number
50,000

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis of the costs

Analysis

IAS 40IAS 40 §18IAS 40 §19IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Points reviewed: criteria, direct costs, excluded costs, deferred payment, maintenance and replacement
ChecklistRequired
- Recognition criteria applied to the costs when they are incurred
- Price and directly attributable expenditure identified
- Costs excluded from the initial cost identified
- Deferred payment: cash price equivalent used
- Day-to-day servicing expensed, replacement of parts capitalised

Cost calculations

Calculations

IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Cash price equivalent: deferred price discounted
Calculation
1,000,000
Agreed price, payable at the end of the credit period ; Rate of the seller's credit (in %) ; Credit period (years)
Capitalisable costs: costs incurred − excluded costs
Calculation
50,000
Costs incurred other than the price (fees, taxes, start-up, losses) ; − Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Initial cost: cash price + capitalisable costs
Calculation
1,050,000
Cash price equivalent: deferred price discounted ; Capitalisable costs: costs incurred − excluded costs

Journal entries

Entries

Directly attributable costs capitalised
Entry
Account Debit Credit
Investment property 50,000
Cash 50,000
Acquisition with deferred payment (cash price equivalent)
Entry
Account Debit Credit
Investment property 1,000,000
Financial liability 1,000,000
Excluded costs recognised as expenses
Entry
Account Debit Credit
Operating expense 20,000
Cash 20,000
Interest for the period on the seller's credit
Entry
Account Debit Credit
Interest expense 50,000
Financial liability 50,000

Account	Debit	Credit
Investment property	50,000
Cash		50,000

Account	Debit	Credit
Investment property	1,000,000
Financial liability		1,000,000

Account	Debit	Credit
Operating expense	20,000
Cash		20,000

Account	Debit	Credit
Interest expense	50,000
Financial liability		50,000

Conclusion

Initial cost and treatment of the costs submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Capitalised costs entry balancedPass
Deferred price entry balancedPass
Excluded costs entry balancedPass
Interest entry balancedPass

Assets: 980,000
Liabilities: 1,050,000
Profit or loss: -70,000
OCI: 0
Equity: -70,000

Inputs

Transaction: property acquired, seller, date and payment terms
Text
Agreed price, payable at the end of the credit period
Number
Rate of the seller's credit (in %)
Number
Credit period (years)
Number
Costs incurred other than the price (fees, taxes, start-up, losses)
Number
Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Number
Interest expense of the first year of the credit
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis of the costs

Analysis

IAS 40IAS 40 §18IAS 40 §19IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Points reviewed: criteria, direct costs, excluded costs, deferred payment, maintenance and replacement
ChecklistRequired
- Recognition criteria applied to the costs when they are incurred
- Price and directly attributable expenditure identified
- Costs excluded from the initial cost identified
- Deferred payment: cash price equivalent used
- Day-to-day servicing expensed, replacement of parts capitalised

Cost calculations

Calculations

IAS 40 §20IAS 40 §21IAS 40 §23IAS 40 §24

Cash price equivalent: deferred price discounted
Calculation
Agreed price, payable at the end of the credit period ; Rate of the seller's credit (in %) ; Credit period (years)
Capitalisable costs: costs incurred − excluded costs
Calculation
Costs incurred other than the price (fees, taxes, start-up, losses) ; − Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Initial cost: cash price + capitalisable costs
Calculation
Cash price equivalent: deferred price discounted ; Capitalisable costs: costs incurred − excluded costs

Journal entries

Entries

Directly attributable costs capitalised
Entry
Debit Investment property ← Capitalisable costs: costs incurred − excluded costs ; Credit Cash ← Capitalisable costs: costs incurred − excluded costs
Acquisition with deferred payment (cash price equivalent)
Entry
Debit Investment property ← Cash price equivalent: deferred price discounted ; Credit Financial liability ← Cash price equivalent: deferred price discounted
Excluded costs recognised as expenses
Entry
Debit Operating expense ← Costs excluded from the initial cost (start-up, initial losses, abnormal waste) ; Credit Cash ← Costs excluded from the initial cost (start-up, initial losses, abnormal waste)
Interest for the period on the seller's credit
Entry
Debit Interest expense ← Interest expense of the first year of the credit ; Credit Financial liability ← Interest expense of the first year of the credit

Conclusion

Initial cost and treatment of the costs submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References