Question bank — IAS 40 — Investment Property
135 questions in FR/EN/ES, scored by the real scoring engine.
Purpose of the standard1 question
Scope of the standard1 question
Scope exclusions1 question
Investment property2 questions
The defined terms2 questions
Examples of investment property2 questions
Examples of items that are not investment property2 questions
Dual-use property: separate sale or lease3 questions
- A property is partly leased to third parties and partly occupied by the entity. Which condition leads to accounting separately for the leased part and the occupied part?Single choiceL3
- Altéa holds a tower in lot-based co-ownership: floors 1 to 6 are leased to third parties, floors 7 and 8 house its head office. Each floor has a separate title and could be sold on its own (case data). What is the classification?Single choiceL3
- A building has shops leased on the ground floor and a service flat occupied by the entity's manager. The units have separate titles, but the entity has never considered selling them separately. In three to five sentences, justify the classification you would adopt.JudgmentL4
Dual-use property: the insignificant owner-occupied portion3 questions
- For a property whose parts cannot be sold separately, the standard sets at 5% of the area the threshold beyond which the occupied part is significant.True / falseL3
- A management accountant comments on the classification of an indivisible property partly occupied by the entity. Which of the analyses is incorrect?Single choiceL4
- Brenmore owns a 6,000 m² office building that cannot be sold in parts. It occupies 150 m², that is 2.5% of the area (case data), for an archive room. The rest is leased to third parties. Which reasoning is most consistent with the rule?Single choiceL4
Ancillary services provided to occupants3 questions
- An owner leases a building and provides some services to the occupants. Which of these statements are correct? (More than one answer possible.)Multiple choiceL3
- Calvera leases an office tower to third parties. It provides security and cleaning of the common areas, services that represent about 3% of the value of the lease arrangement (case assumption). Which classification is consistent with the rule?Single choiceL3
- Dorane owns a hotel. It has entrusted its management to an operator by contract, but it bears the results of operations and the services to guests (catering, housekeeping, reception) are significant within the arrangement as a whole (case data). In three to five sentences, justify the classification of the hotel.JudgmentL4
Judgement on the significance of services2 questions
- An analyst comments on the classification of hotels under management contracts. Which of the analyst's statements is incorrect?Single choiceL3
- Two similar office buildings are leased. For the first, the security services included represent 3% of the value of the arrangement; for the second, the concierge, catering and meeting rooms run by the entity represent 35% of the income from the property (case data). An analyst classified them in the same way. In three to five sentences, explain why the same classification is not automatic.JudgmentL4
Classification criteria to define and disclose2 questions
- When the classification of a property (investment property, owner-occupied property or inventory) is difficult, what must the entity do?Single choiceL3
- A group holds partly leased buildings whose classification is difficult. In three to five sentences, explain what the entity must define and disclose, and why this helps the reader of the financial statements.JudgmentL4
Property leased within the group1 question
Recognition criteria2 questions
Subsequent costs2 questions
- The owner of an investment property spends 8,000 on day-to-day servicing (painting, minor repairs). How is this expenditure accounted for?Single choiceL1
- Which of the following expenditures on an investment property are recognised as an asset, the recognition criteria being met? (More than one answer possible.)Multiple choiceL2
Cost at initial recognition3 questions
- Falvik acquires an office building that it intends to lease. Purchase price: …. It also pays … of property transfer taxes and … of legal fees, directly attributable to the acquisition (case data). Calculate the initial cost of the investment property.CalculationL2Variant
- Gorvane buys a plot of land to hold for long-term capital appreciation. The contract sets the price at …. Gorvane also pays … of notary fees, … of registration duties and … of agency commission, all directly linked to this acquisition. At what cost is the land initially recognised?CalculationL2Variant
- Halvén acquires a building that it will hold to earn rentals. The purchase price of … is due to the seller within 30 days. It paid … in cash for directly attributable costs. Record the initial recognition entry.Journal entryL3
Transaction costs3 questions
- Legal fees directly linked to the acquisition of an investment property are recognised as an expense of the period.True / falseL2
- Ivora acquires a warehouse intended for lease for …. It incurs … of legal fees, … of property transfer taxes and … of technical survey fees specific to this warehouse, all directly attributable to the acquisition (case data). Calculate the total transaction costs included and the initial cost.CalculationL3
- A finance director comments on the initial measurement of an acquired investment property. Which of the statements is incorrect?Single choiceL3
Costs excluded from the initial cost3 questions
- An accounting manager states four rules on the costs of a new investment property. Which is incorrect?Single choiceL2
- Jarmel incurred … of expenditure to bring a new investment property into service. This total includes … of start-up costs and … of operating losses incurred before the property reached the planned occupancy level. The remainder is directly attributable to the acquisition and construction (case assumption). Calculate the cost to be recognised as an asset.CalculationL3
- Kestrel Immo has just bought a new investment property. It paid … in cash for start-up costs (commercial launch campaign). Record the corresponding entry.Journal entryL3
Deferred payment3 questions
- An investment property is bought with settlement deferred by two years, beyond normal credit terms. How is the difference between total payments and the cash price equivalent accounted for?Single choiceL2
- Lormel acquires an investment property. It will settle … in two years, with no interim payment. The annual discount rate reflecting the credit granted is … (case data). Calculate the cash price equivalent and the total interest to be expensed over the period.CalculationL3
- Marvel acquires an investment property and undertakes to pay … in three years. The cash price equivalent, after discounting, is … (case data). Record the initial recognition entry.Journal entryL3
Property held under a lease3 questions
- The initial measurement of a right-of-use asset held as investment property remains governed by the original wording of IAS 40 on finance leases under IAS 17.True / falseL2
- Nerval leases a floor of a building for ten years and sub-leases it to third parties to earn rentals. The right-of-use asset meets the definition of investment property (case assumption). Which initial treatment is consistent?Single choiceL3
- Orvane leases a floor for two years: rent of … at the end of the first year and … at the end of the second. The annual discount rate is … (case data). For teaching simplicity, assume no other payment (no variable rent, no initial direct costs). Calculate the present value of the rents, the basis for the initial measurement of the right-of-use asset.CalculationL3
Acquisition by exchange of assets4 questions
- An investment property acquired in exchange for another asset is measured at the carrying amount of the asset given up, even when the exchange has commercial substance and the fair value of the asset given up is reliably measurable.True / falseL2
- Marvel exchanges a plot of land (carrying amount …, fair value …) for a building to be leased, and pays an additional … in cash. The exchange has commercial substance (case data). Calculate the cost of the investment property acquired.CalculationL3
- Pivane exchanges an owner-occupied building (carrying amount 750,000, fair value 820,000) for an investment property. The expected cash flows are not changed: the exchange lacks commercial substance (case data). No cash is paid. At what amount is the property acquired recognised?Single choiceL3
- Draco SA gives up land with a carrying amount of 600,000 in exchange for a building that it will hold as investment property (case facts). The exchange has commercial substance. The fair value of the land, 900,000, is reliably measurable; that of the building received, estimated at 950,000, is not more clearly evident than that of the land (data and judgement given by the case). What initial cost does Draco use for the building?Single choiceL3
The choice of model: fair value or cost1 question
Change in accounting policy1 question
Investments backing linked liabilities1 question
Measurement at fair value3 questions
- An entity applies the fair value model. How is an investment property measured after initial recognition?Single choiceL2
- Ravène applies the fair value model. Its investment property was carried at … at the start of the period; at the reporting date, its fair value is …. There were no acquisitions or disposals. Record the closing entry.Journal entryL3
- Sorel measures its investment property portfolio at fair value. Opening carrying amount: …. During the period, it acquires a property for … and sells another whose carrying amount was …. The fair value of the portfolio at the reporting date is …. Calculate the fair value gain for the period.CalculationL3
Fair value changes in profit or loss3 questions
- Tarvan applies the fair value model. Its investment properties were carried at … at the start of the period. It acquired a new one during the period for …. The fair value of the whole at the reporting date is …. What amount is recognised in profit or loss for the change in fair value?CalculationL2Variant
- At the reporting date, the only investment property of Ulmane, measured at fair value, is worth … whereas it was carried at … a year earlier. There was no expenditure or disposal on it. What fair value loss does Ulmane recognise in profit or loss?CalculationL3Variant
- Verdane measures its investment property at fair value. One of them, carried at … at the start of the period, has a fair value of … at the reporting date. There were no movements. Record the closing entry.Journal entryL3
The fair value of investment property2 questions
- Under IAS 40, what does the fair value of an investment property reflect at the reporting date?Single choiceL2
- An appraiser proposes for an investment property a value of 9,800,000 that includes synergies only Wexan could obtain by combining the property with its own sites; market conditions at the reporting date would lead to 9,200,000 (case data). In three to five sentences, justify the value to use under the fair value model.JudgmentL3
The link with IFRS 132 questions
- IAS 40 contains its own complete set of rules to determine the fair value of an investment property, with no reference to another standard.True / falseL2
- Xalme's accounting department must determine the fair value of an investment property measured under the fair value model, and hesitates between four frameworks. Which one frames this determination?Single choiceL3
Leases in the valuation3 questions
- A leased investment property is measured at fair value. How are the current leases taken into account in the measurement?Single choiceL2
- Yvane holds a leased property, measured at fair value. The appraisal value, which takes the current leases into account, is …. It includes … of accrued rent not yet collected, already recognised separately as a receivable (case data). What amount does Yvane record for the investment property?CalculationL3
- A fully leased office building is measured by an appraiser at 12,400,000, taking the current leases into account. The finance director proposes adding to this amount the sum of the rents still to be received under the leases "to reflect the contracts" (case data). In three to five sentences, explain whether this proposal is acceptable.JudgmentL3
Avoiding double counting3 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?Single choiceL2
- Zalvane leases furnished offices. The appraiser values the whole at …, furniture included, because the rents pay for the furnished space. The furniture accounts for … of that value (case data). What amount does it present for the investment property, without recognising the furniture as a separate asset?CalculationL3
- 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?Single choiceL3
Fair value not reliably determinable3 questions
- An entity may abandon the fair value model for a property as soon as measuring its fair value becomes difficult or costly.True / falseL2
- On acquiring a property, Brevane establishes that its fair value cannot be determined reliably on a continuing basis (exceptional case, documented evidence). It therefore applies the cost model until the property is disposed of. Cost: …; useful life: …; straight-line depreciation (case assumption). Calculate the annual depreciation charge.CalculationL3
- On acquiring a property, there is no comparable market and the entity demonstrates, with supporting evidence, that its fair value cannot be determined reliably on a continuing basis. In three to five sentences, explain the accounting treatment applicable to this property.JudgmentL3
The IAS 16 cost model3 questions
- An entity has chosen the cost model for its investment property. What does it do after initial recognition?Single choiceL2
- Cormane applies the cost model to its investment property. Original cost: …. Accumulated depreciation at the reporting date: …. Accumulated impairment losses: …. Calculate the carrying amount of the property at the reporting date.CalculationL2
- Delmane applies the cost model to a building held as investment property whose depreciable amount is …, depreciated on a straight-line basis over 30 years (case assumption). The charge for the period is …. Record the depreciation entry.Journal entryL3
Cost model and held-for-sale property2 questions
- An investment property measured under the cost model that meets the criteria for being held for sale remains subject to the IAS 16 cost model like the others.True / falseL2
- Evrane, which applies the cost model, decides to sell an investment property with a carrying amount of 2,400,000. The criteria for classification as held for sale are met on 30 June (case data). Which treatment is consistent with the rule?Single choiceL3
Cost model and right-of-use assets2 questions
- An entity applies the cost model and holds a right-of-use asset meeting the definition of investment property. What must it do after initial recognition?Single choiceL2
- Fluvane holds a right-of-use asset over a property leased to third parties, recognised as investment property under the cost model for 20,000 at inception, with a two-year lease. For teaching simplicity, assume straight-line depreciation over the lease term, with no residual value or impairment. What is the carrying amount of the right at the end of the first year?Single choiceL3
A transfer requires a change in use4 questions
- Under what condition may a property be transferred to or from investment property?Single choiceL3
- A consolidation manager comments on transfers of investment property. Which of the manager's statements is incorrect?Single choiceL3
- Gavane leased a building to a third party. The lease ended; on 1 March, Gavane sets up its own offices in it and assigns its staff there (case facts). It measures its investment property under the cost model. Which reasoning is consistent with the rule?Single choiceL4
- Cygnus SA holds two investment properties (case facts). The board decides to sell the Rive property as it stands, without development, and to redevelop the Parc property, which will continue to be leased to third parties after the works. How are these properties classified in the meantime?Single choiceL3
Evidence of the change, not intent3 questions
- The board's decision to sell a leased property is enough, on its own, to evidence a change in use justifying its transfer to inventory.True / falseL3
- Among these facts about a property, which can evidence a change in use, as opposed to a mere management intention? (More than one answer possible.)Multiple choiceL3
- The board of Hessane announces its intention to convert, in eighteen months, an investment property into administrative head offices; no step has been taken and the property remains leased (case data). The finance director wants to transfer it to owner-occupied property this month. In three to five sentences, justify your position.JudgmentL4
Transfers under the cost model3 questions
- Under the cost model, the transfer of an investment property to owner-occupied property leads to remeasuring it at fair value at the date of the change in use.True / falseL3
- Ivarne applies the cost model. On 30 September, it starts occupying a property previously leased, which evidences a change in use (case data). Cost of the property: …; accumulated depreciation: …; carrying amount: …. Record the transfer entry to owner-occupied property.Journal entryL4
- Jolvane, which applies the cost model, transfers an investment property to owner-occupied property after an evidenced change in use. Cost: 6,000,000; accumulated depreciation: 1,500,000; fair value at the date of transfer: 7,200,000 (case data). At what carrying amount is the owner-occupied property recorded after the transfer?Single choiceL4
From owner-occupied to investment property4 questions
- Owner-occupied property becomes an investment property that will be measured at fair value. What treatment applies up to the date of the change in use, and on that date?Single choiceL3
- On 1 April, Itérane stops occupying a building and starts leasing it to third parties (change in use, case data). It measures its investment property at fair value. Up to that date, the building has been depreciated under IAS 16: its carrying amount is …. Its fair value at the date of the change in use is …. Calculate the difference to be treated as a revaluation under IAS 16.CalculationL3
- Kalvane stops occupying a building and leases it to third parties (change in use evidenced, case data). It measures its investment property at fair value. Carrying amount of the building under IAS 16 at that date: …; fair value: …. Assume no earlier decrease of this building was recognised in profit or loss (case convention). Record the transfer entry.Journal entryL4
- Lunvane stops occupying a building, carrying amount 4,000,000 under IAS 16, and leases it to third parties (change in use evidenced). It measures its investment property at fair value, which is 3,700,000 at that date. The building has never been revalued and no revaluation surplus exists (case data). How is the 300,000 difference treated?Single choiceL4
From inventory to investment property4 questions
- On the transfer of inventory to investment property measured at fair value, the difference between fair value and the previous carrying amount is recognised in other comprehensive income.True / falseL3
- Marlane, a developer, held apartments in inventory for sale, recorded at …. For lack of buyers, it leases them to third parties (change in use evidenced, case data). It measures its investment property at fair value, which is … at the date of the change. What gain does it recognise in profit or loss for the transfer?CalculationL3
- Norvane transfers to investment property a building it held as inventory, after signing a lease with a tenant (change in use evidenced, case data). Carrying amount of inventory: …; fair value at the date of the change: …. It applies the fair value model. Record the transfer entry.Journal entryL3
- An accounting director comments on the transfer of inventory to an investment property measured at fair value. Which of the statements is incorrect?Single choiceL4
From investment property to owner-occupied4 questions
- An investment property measured at fair value becomes owner-occupied property after an evidenced change in use. What is its deemed cost for subsequent accounting?Single choiceL3
- Oravane measures its investment property at fair value. On 1 October, it moves its head office into one of them (change in use evidenced, case data). Its carrying amount at the last reporting date was …; its fair value on 1 October is …. At what amount is the owner-occupied property recognised, as deemed cost, in its subsequent accounting?CalculationL3
- Pavane applies the fair value model. It begins to occupy an investment property (change in use evidenced, case data). The latest change in fair value is already recognised: its fair value at the date of the change is …. Record the transfer entry to owner-occupied property.Journal entryL3
- Quivane measures its investment property at fair value: 8,000,000 at the last reporting date for a property it begins to occupy entirely as offices on 1 September, which evidences a change in use (case data). Its fair value on 1 September is 8,300,000. What amount should be used as the deemed cost of the owner-occupied property?Single choiceL4
From investment property to inventory4 questions
- A management accountant comments on the transfer of an investment property measured at fair value to inventories. Which of the statements is incorrect?Single choiceL3
- Ravane measures at fair value an investment property made up of 24 identical apartments. It begins developing the building with a view to selling the apartments (change in use evidenced, case data). On that date, fair value is … per apartment; the carrying amount at the last reporting date was …. What is the deemed cost of the inventory?CalculationL3
- Sorvane applies the fair value model. It begins developing an investment property with a view to selling it (change in use evidenced, case data). The latest change in fair value is already recognised; the fair value at the date of the change is …. Record the transfer entry to inventory.Journal entryL4
- Talvane measures its investment property at fair value. Its board decides to sell a leased property after refurbishment, but no work has started and the property is still leased (case data). The controller proposes an immediate transfer to inventory. In three to five sentences, justify whether this transfer is possible and at what value it would be made.JudgmentL4
Derecognition3 questions
- An investment property is derecognised as soon as management decides to put it up for sale.True / falseL2
- An accountant states four rules on derecognition of an investment property. Which is incorrect?Single choiceL2
- A fire destroys Hortane's investment property, measured under the cost model and carried at 1,200,000. The property is permanently out of use and no disposal proceeds are expected (case facts). Which treatment is consistent with the rule?Single choiceL3
The date of disposal2 questions
- On what date is a sold investment property derecognised?Single choiceL2
- On 15 November, Isarne signs a sale promise for an investment property, subject to conditions precedent. The final deed is signed and the keys handed to the buyer on 20 December, when the buyer obtains control (case facts). The reporting date is 31 December. On what date is the property derecognised?Single choiceL3
Replaced parts1 question
Gain or loss on disposal5 questions
- Jovane, which applies the cost model, replaces the lift of an investment property. The new lift costs … and meets the recognition criteria. The old lift was carried at … (case data) and has no disposal value. Calculate the loss to recognise on the replaced part and the net change in the carrying amount of the property.CalculationL3
- Kelvane replaces the roof of an investment property. The new roof, which meets the recognition criteria, costs …, paid in cash. The old roof was included in the carrying amount of the property at … (case data) and has no disposal value. The entity applies the cost model. Record the entry.Journal entryL3
- Lorvane measures its investment property at fair value. It sells a property for …, with … of selling costs. The carrying amount at the date of disposal, equal to the latest fair value recognised, is …. Calculate the net disposal proceeds and the gain or loss on disposal.CalculationL2Variant
- Mirane applies the cost model. It sells a building held as investment property whose original cost is … and accumulated depreciation … (no impairment loss). The agreed price is …, and the agency fees borne by Mirane amount to …. What loss on disposal is recognised in profit or loss, and on what net proceeds?CalculationL3Variant
- Nolvane applies the cost model. It sells an investment property whose gross cost is … and accumulated depreciation …. It collects … net of selling costs. Record the disposal entry.Journal entryL3
Consideration on disposal3 questions
- A management accountant comments on the gain or loss on disposal of an investment property. Which of the statements is incorrect?Single choiceL2
- Ostrane sells an investment property. The price of … is payable in one year, which is a significant financing component (teaching assumption); the annual discount rate is …. Selling costs amount to … and the carrying amount of the property is …. Calculate the net disposal proceeds and the gain or loss on disposal.CalculationL3
- Pelvane sells an investment property with a carrying amount of …. The price is …, payable in one year; its present value, which represents the consideration measured under the transaction price, is … (teaching assumption). There are no selling costs. Record the disposal entry.Journal entryL3
Liabilities retained after disposal2 questions
- An obligation that remains after the disposal of an investment property, for example a guarantee given to the buyer, disappears automatically on derecognition of the property.True / falseL2
- Quirane sells an investment property and undertakes to guarantee the buyer against structural defects for two years. The property is derecognised at the date of disposal (case facts). What does it do with its guarantee commitment?Single choiceL3
Compensation from third parties3 questions
- An investment property is damaged by a third party, which must pay compensation. When is the compensation recognised in profit or loss?Single choiceL2
- A fire caused by a contractor destroys an investment property of Rovane, carried at … and derecognised. The contractor's insurer acknowledges owing compensation of …, which became receivable during the period (case facts). Calculate the compensation income recognised and the net effect on profit or loss, the loss on the property being recognised separately.CalculationL3
- The court recognises that Salvane is entitled to compensation of … owed by a third party that damaged its investment property. The compensation becomes receivable today (case data). Record the corresponding entry, the loss on the property being recognised elsewhere.Journal entryL3
Additional disclosures for leases1 question
Model adopted and classification criteria1 question
Reconciliation under the fair value model1 question
Disclosures under the cost model1 question
The 2016 amendment on transfers1 question
Effective dates1 question
Interaction with IAS 161 question
- What is the link between IAS 40 and IAS 16?Single choiceL2