IAS 40 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
- Case studies
- Workpapers
- Exams
Initial cost and capitalisation of an investment property
Acquisition of a building: initial cost, excluded costs and deferred payment
Section 1 of 9
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IAS 40 workpaper
- Level
- Intermediate
- Estimated time
- ≈ 45 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Verdane Immobilier SA (fictitious entity) acquires an office building for letting on 1 January 20X5. The seller grants deferred payment of 2 years, beyond normal credit terms. Fees, transfer taxes, start-up costs and initial operating losses are paid in cash.
Assignment
Initial cost file
Purpose 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.
Questions of the file covered by this workpaper
- 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.
Documents in the file
Open the documents to pick out the relevant information.