Investment Property - DQ

1. How is an investment property distinguished from owner- occupied property?
From
inventories?
Distinguishing investment property from owner-occupied property and inventories

involves recognizing key differences. Investment property is held for earning rental
income, capital appreciation, or both, and is not used for goods or services production
or administrative purposes. In contrast, owner-occupied property is utilized for
production or services, or administrative functions, without the goal of generating rental
income or capital appreciation. Furthermore, investment property is a long-term asset
held for long-term rental income or capital appreciation, while inventories are short-term
assets held for sale, consumption, or production.
2. Give instances when an asset is classified "from" and "into" investment property.
Formulate entries for their reclassification "from" and "into" investment property.
The reclassification process involves two scenarios: "From" and "Into" Investment
Property. In the case of reclassification "From" Investment Property, assets are
transferred to either owner-occupied property or inventories. The corresponding entry
for this transaction includes debiting Investment Property and crediting either Owner-
Occupied Property or Inventories. On the other hand, in reclassification "Into"
Investment Property, an asset is shifted from owner-occupied property or inventories to
investment property. The entry for this transaction comprises debiting Investment
Property and crediting either Owner-Occupied Property or Inventories. These
reclassification entries are crucial for accurately reflecting changes in the nature and
use of assets within financial records.
3. How are assets classified as investment property measured in the statement of

financial position? Explain each measurement model.
The measurement of investment property is conducted using the fair value approach,
and two distinct measurement models are applied: the Fair Value Model and the Cost
Model. Under the Fair Value Model, any changes in the fair value of investment property
are directly recognized in the profit or loss statement. This model provides a real-time
reflection of market fluctuations in the property's value. In contrast, the Cost Model
acknowledges depreciation and impairment of the investment property but does not
factor in changes in fair value. This model is more conservative in its approach,
recognizing only the tangible, physical deterioration or impairment of the property rather
than considering broader market dynamics.
4. Mendez Corporation and its subsidiaries are preparing a consolidated statement of
financial position at the end of the current year. Indicate which of the following items will
be reported by the group under the caption "Investment Property".
a. Land held for long-term capital appreciation
b. Land held for a currently undetermined future use
C. Building owned and leased out under operating leases
d. Building owned and leased out under finance leases.
e. Vacant building that is intended to be leased out under operating leases
f. Building that is being constructed or developed for future use as owner occupied
g. Building that is being constructed or developed to be leased out under operating

leases
h. Building that is being constructed or developed to be leased out under finance leases
i. Condominium building that is being constructed intended for sale in the ordinary
course of business
j. Land subdivided into smaller lots intended for sale in the ordinary course of business
k. Property constructed on behalf of a third party
l. Building occupied by the company as factory site

m. Building occupied by the company for administrative purposes
n. Building that houses materials for use in construction activities
o. Building being leased out under operating leases, an insignificant portion of which is
held as headquarters for security, maintenance and administrative purposes
p. Land and building owned by Mendez and occupied by the subsidiary, which leases
the property from Mendez
q. Property interest in a building leased from Ayala Corporation that is being occupied
by the company as sales outlet
r. Property interest in a building leased from Vista Corporation that is being subleased to
others under operating leases.
s. Property interest in a building leased from Jordan Property Management that is being
subleased to others and from which significant rental income is derived.
Yes,
A, c, e, g, o, s
No,
B, d, f, h, I, j, k, l, m, n, p, q, r

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1. How is an investment property distinguished from owner- occupied property?

Distinguishing investment property from owner-occupied property and inventories

3. How are assets classified as investment property measured in the statement of

a. Land held for long-term capital appreciation

b. Land held for a currently undetermined future use

C. Building owned and leased out under operating leases

d. Building owned and leased out under finance leases.

e. Vacant building that is intended to be leased out under operating leases

g. Building that is being constructed or developed to be leased out under operating

k. Property constructed on behalf of a third party

l. Building occupied by the company as factory site

n. Building that houses materials for use in construction activities

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