IAS 40 Investment Properties

1. FM0616_Q5/FM0915_Q5/FM0916_Q4/ FM0617_Q4
Which of the following could be classified as investment property in accordance with IAS 40 Investment
Property in the financial statements of Investit?

i) Properties held for sale by Investit in the ordinary course of business F

ii) Investit's factory building unused by itself as a factory T
iii) A floor let to third parties in an office building occupied by Investit F
iv) A building let out to third parties which is falling in value T

2. PT1_Q9
Which of the following is TRUE in respect of investment property in an entity's separate financial statements?
(TRUE/FALSE)

i) Investment property can be held at cost rather than fair value. TRUE
ii) Investment property is never depreciated. FALSE
iii) Property leased to another group company cannot be classified as investment property. FALSE
iv) Gains reported on investment property are held in a separate revaluation reserve. FALSE

3. Bec_Q10.1
What is the definition of an investment property according to IAS 40 Investment Property?

A. An investment in land and or buildings whether let to third parties or occupied by an entity within the group
B. A property owned and occupied by an entity for its own purposes
C. A property which is held to earn rentals or for capital appreciation
D. An investment in land and or buildings other than leased property

4. Bec_Q10.2
IAS 40 Investment Property gives examples of investment properties. Which of the followings are listed by IAS
40 Investment Property?

i) Property held for long-term capital appreciation

ii) Property leased to another entity on a finance lease
iii) Property leased out under one or more operating leases
iv) Owner-occupied property
v) Land held for an undetermined future use
vi) Property occupied by employees

5. Bec_Q10.3
Which of the following qualifies as investment property under IAS 40 Investment Property?

A. A building that is vacant but is held to be leased out under an operating lease
B. Property being constructed on behalf of third parties
C. Property that is leased to another entity under a finance lease
D. Owner-occupied property
6. Bec_Q10.4
Under IAS 40 Investment Property, which of the following transfers would result in a change from cost
measurement to fair value measurement?

i) A transfer from investment property to owner-occupied property

ii) A transfer from inventories to investment property at the commencement of an operating
lease to another party
iii) A transfer from investment property to inventories, when the property is intended for sale

7. Bec_Q10.5
Under IAS 40 Investment Property, which of the following is correct?

A. Investment property is property held for administrative purposes

B. Investment property is property held for use in the supply of services
C. Investment property is property held for use in the production of goods
D. Investment property is property held by owner to earn rental income or for capital appreciation

8. Kap_Q6
Which of the following properties would be classified as an investment property?

A. A stately home used for executive training but which no longer required and is now being held for resale
B. Purchased land for investment potential. Planning permission has not been obtained for building construction
of any kind
C. A new office building used by an insurance entity as its head office which was purchased specifically in the
centre of a major city in order to exploit its capital gains potential
D. A property that has been leased out under a finance lease

9. FM1215_Q3
An entity owns a building (and its land). The building is rented out to a third party under an operating lease and
the entity treats it as investment property. The entity measures its investment property using the fair value
model.

The property had a fair value of $9m on 31 December 20X1 and $9.3m on 31 December 20X2.

As at 31 December 20X1 the building (which represents 50% of the fair value of the property) had a remaining
useful life of 40 years and estimated residual value of $1m. The estimated useful life and residual value did not
change during 20X2.

How much should be recognised in profit or loss for the year ended 31 December 20X2 in respect of the
investment property?

10. FAR400_Apr’10_Q7
On 1 January 2009, Komtar Bhd vacated a building that it occupied as its administrative centre and rented it out
to several tenants. Komtar Bhd reclassified the building as investment property and measured it using the fair
value model. The carrying value and the fair value of the building on 1 January 2009 were RM1.2million and
RM1.6million respectively.
The difference of RM0.4million should be credited

A To the Asset Revaluation Reserves

B To the Income Statement as change in fair value
C As profit on disposal
D As deferred gain

11. FAR400_Apr’10_Q8
Which of the following statement is true if company adopts the fair value model to measure its investment
property?

A The investment property will be carried out at cost and subject to depreciation and impairment test
B The investment property will be carried at its fair value with changes charged or credited to income
statement each year
C The investment property will be carried at its fair value with changes accounted as a revaluation surplus
or deficit in accordance with IAS 16 Property, Plant and Equipment
D The investment property will be carried at its fair value with changes charged or credited to income
statement each year and subject to impairment test

12. FAR400_Feb 09_Q6

On 1 January 2004, Gunung Lambak Bhd acquired a building for own use at a cost of RM14,000,000. In addition,
the company incurred legal fees of RM2,800,000. The building was depreciated on a straight line basis over 40
years. On 1 January 2006, the building was revalued to RM15,200,000. On 1 January 2008, the building was
rented out and the fair value of the building on this date was RM16,900,000. Gunung Lambak adopts the
revaluation model and the fair value model for the subsequent measurement of its property, plant and
equipment and investment property respectively.

Which of the following journal entries is true to record the change in fair value of the building at the date of
transfer?

DEBIT/CREDIT ACCOUNT AMOUNT ($)

BUILDING
SOPL

13. FAR400_Feb 09_Q8

Which of the following properties is not an investment property?

A Land held for long term capital appreciation

B Land held for undetermined future use
C A building that is vacant but is held to be leased out under operating lease
D A building that is vacant but is held to be leased out under finance lease

14. FAR400_Apr’09_Q3
Which of the following properties is considered as an investment property?

A A property owned and managed as hotel

B A newly acquired property still of undetermined use
C A property currently being constructed and developed for future use as an investment property
D A property currently rented out to existing employees under finance lease arrangement
15. FAR400_Apr 09_Q7
On 1 January 2006, Yellowstone Bhd bought a factory costing RM50,000,000 for investment purposes. Its
estimated useful life was 50 years with no salvage value. The market value of the factory as at 31 December
2007 and 31 December 2008 were RM55,000,000 and RM48,000,000 respectively.

Which of the following statement is true if the company adopts the fair value model for its investment
properties?

A The investment property will be carried at cost and subject to depreciation and impairment test
B The investment property will be carried at its fair value with changes charged or credited to income
statement each year
C The investment property will be carried at fair value with changes accounted as revaluation surplus or
deficit
D The investment property will be carried at its fair value with changes charged or credited to income
statement each year and subject to depreciation and impairment test

16. FAR400_Oct 09_Q2

Which of the following properties is not an investment property?

A Land held for long term capital appreciation rather than for short term sale
B A building that is vacant but is held to be leased out under operating lease
C Land which is currently held for undetermined future use
D Property that is being constructed for future use as investment property

17. FAR400_Oct 10_Q3

Amree Bhd adopts the cost model in the measurement of its investment properties. As at 30 June 2010, the
carrying amount of its investment property was RM5,000,000, while the fair value at that date was
RM6,000,000. The surplus of RM1,000,000 should be:

A. Credited to income statement for the year.

B. Credited to retained earnings in the shareholders’ equity.
C. Credited to revaluation reserve in the shareholders’ equity.
D. None of the above.