Avoiding double counting

Learning objectives

• Avoid double counting between fair value and assets or liabilities recognised separately (equipment, prepaid rentals).L2, L3
• Calculate, from the case data, the amount relating to avoiding double counting and justify the basis of calculation.L2, L3

Normative references

• IAS 40 §50No double counting: fair value does not double count assets or liabilities recognised as separate assets or liabilities — (a) integral equipment; (b) furnished leased property: fair value generally includes the furniture, which is then not recognised as a separate asset; (c) prepaid or accrued operating lease income: excluded; (d) leased property: the recognised lease liability is added back when the valuation is net of the payments.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• A management accountant comments on the risk of double counting in the fair value measurement of an investment property. Which of the statements is incorrect?L2
• Zalvane leases furnished offices. The appraiser values the whole at {appraisal_value}, furniture included, because the rents pay for the furnished space. The furniture accounts for {furniture_recognised_separately} of that value (case data). What amount does it present for the investment property, without recognising the furniture as a separate asset?L3
• Ardane measures its investment property at fair value: 20,000,000 according to the appraiser, who includes the lifts and the air conditioning, integral parts of the building. The accountant also wants to record this equipment separately for 210,000 (case data). What should be done?L3