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Tangible non-current assets

Example 3

Investment property

Berba purchases a property for $5 million on 1 January 20X7 for its
investment potential. The land element of the cost is $1 million, and the
buildings element is expected to have a useful life of 50 years. At 31
December 20X7, local property indices suggest that the fair value of the
property has risen to $5.5million.

Show extracts from the financial statements of Berba for the year ended
31 December 20X7 in the proforma below, using the cost and fair value
models.

Cost Fair value

$000 $000
Statement of profit or loss

Depreciation (80) –
(5,000 – 1,000) × 1/50

Gain on investment property – 500
(5,500 – 5,000)

Statement of financial position

Investment property 4,920 5,500
(5,000 – 80)

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