IAS 40 (Investment Property) Exam Questions & Answers 2024/2025
True - ANSWERSThe objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.
par. 1
True - ANSWERSThis Standard shall be applied in the recognition, measu...
True - ANSWERSThe objective of this Standard is to prescribe the accounting treatment for investment
property and related disclosure requirements.
par. 1
True - ANSWERSThis Standard shall be applied in the recognition, measurement and disclosure of
investment property.
par. 2
False - ANSWERSThis Standard applies to:
(a) biological assets related to agricultural activity (see IAS 41 Agriculture and IAS 16 Property, Plant and
Equipment); and
(b) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.
par. 4
True - ANSWERSCarrying amount is the amount at which an asset is recognised in the statement of
financial position.
par. 5
False - ANSWERSFair value is the amount of cash or cash equivalents paid or the fair value of other
consideration given to acquire an asset at the time of its acquisition or construction or, where applicable,
the amount attributed to that asset when initially recognised in accordance with the specific
requirements of other IFRSs, eg IFRS 2 Share-based Payment.
,par. 5
False - ANSWERSCost is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. (See IFRS 13 Fair Value
Measurement).
par. 5
True - ANSWERSInvestment property is property (land or a building—or part of a building— or both) held
(by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both,
rather than for:
(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.
par. 5
False - ANSWERSOwner-occupied property is property held (by the owner or by the lessee as a right-of-
use asset) not for use in the production or supply of goods or services or for administrative purposes.
par. 5
True - ANSWERSInvestment property is held to earn rentals or for capital appreciation or both.
Therefore, an investment property generates cash flows largely independently of the other assets held
by an entity. This distinguishes investment property from owner-occupied property. The production or
supply of goods or services (or the use of property for administrative purposes) generates cash flows
that are attributable not only to property, but also to other assets used in the production or supply
process. IAS 16 applies to owned owner-occupied property and IFRS 16 Leases applies to owner-
occupied property held by a lessee as a right-of-use asset.
par. 7
True - ANSWERSThe following are examples of investment property:
, (a) land held for long-term capital appreciation rather than for short-term sale in the ordinary course of
business.
(b) land held for a currently undetermined future use. (If an entity has not determined that it will use the
land as owner-occupied property or for short-term sale in the ordinary course of business, the land is
regarded as held for capital appreciation.)
(c) a building owned by the entity (or a right-of-use asset relating to a building held by the entity) and
leased out under one or more operating leases.
(d) a building that is vacant but is held to be leased out under one or more operating leases.
(e) property that is being constructed or developed for future use as investment property.
par. 8
True - ANSWERSThe following are examples of items that are not investment property and are therefore
outside the scope of this Standard:
(a) property intended for sale in the ordinary course of business or in the process of construction or
development for such sale (see IAS 2 Inventories), for example, property acquired exclusively with a view
to subsequent disposal in the near future or for development and resale.
(b) [deleted]
(c) owner-occupied property (see IAS 16 and IFRS 16), including (among other things) property held for
future use as owner-occupied property, property held for future development and subsequent use as
owner-occupied property, property occupied by employees (whether or not the employees pay rent at
market rates) and owner-occupied property awaiting disposal.
(d) [deleted]
(e) property that is leased to another entity under a finance lease.
par. 9
True - ANSWERSSome properties comprise a portion that is held to earn rentals or for capital
appreciation and another portion that is held for use in the production or supply of goods or services or
for administrative purposes. If these portions could be sold separately (or leased out separately under a
finance lease), an entity accounts for the portions separately. If the portions could not be sold separately,
the property is investment property only if an insignificant portion is held for use in the production or
supply of goods or services or for administrative purposes.
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