There are different accounting standards that have been introduced by the respectable bodies in order to make the accounting process of the assets convenient. In this paper, a company name, Empire Real Estate Investment Trust needs financial advice regarding its matter of office building in Central London. The paper is divided into four different parts in which four different situations are provided and the treatment of which is elaborated under two accounting standards that is IAS 40 and IAS 16. The rent, use of building for office purpose, and profit and loss from the sale of the building is explained in this paper in the context of both IAS 16 and IAS 40.
a) Treatment of Building under IAS 40
It is found that there are various financial …show more content…
Moreover, it is imperative from the prospect of Empire Real Estate that they should consider all-important factor at the time of renting their building for the reason that they have to charge it is an investment property in their financial statements (Rathore, 2008). It is noted that due to the increasing level of risk of deceiving stakeholders and other financers, the accounting bodies are quite keen to impose strict rules and regulations in order to restrict organisations to show all their income and expenditure as per standard. Furthermore, with the help of strict rules & regulations they are able to minimise the risk of cheating and assist the external users to know the actual financial position of an association appropriately. It is assumed that in the forthcoming years the value of property will be rises sharply that is a good sign from an organisational prospect for the reason that they are able to get the greater benefit from their resources (Greuning & Koen, 2011; Greuning, et al., …show more content…
The property prices are expected to rise in next few years, which make it important for the company to consider revaluation model. Under this model, the asset is carried at a revalued amount, which is regarded as its fairer value at the date of revaluation from which depreciation of the building is then subtracted so that fair value can be measured reliably. This means that in the accounts of the December 2015 and the subsequent years, the cost of the asset would be treated as revaluated amount by considering revaluation model of IAS 16 (Alexander & Archer, 2008; Greuning & Koen,
a) Treatment of Building under IAS 40
It is found that there are various financial …show more content…
Moreover, it is imperative from the prospect of Empire Real Estate that they should consider all-important factor at the time of renting their building for the reason that they have to charge it is an investment property in their financial statements (Rathore, 2008). It is noted that due to the increasing level of risk of deceiving stakeholders and other financers, the accounting bodies are quite keen to impose strict rules and regulations in order to restrict organisations to show all their income and expenditure as per standard. Furthermore, with the help of strict rules & regulations they are able to minimise the risk of cheating and assist the external users to know the actual financial position of an association appropriately. It is assumed that in the forthcoming years the value of property will be rises sharply that is a good sign from an organisational prospect for the reason that they are able to get the greater benefit from their resources (Greuning & Koen, 2011; Greuning, et al., …show more content…
The property prices are expected to rise in next few years, which make it important for the company to consider revaluation model. Under this model, the asset is carried at a revalued amount, which is regarded as its fairer value at the date of revaluation from which depreciation of the building is then subtracted so that fair value can be measured reliably. This means that in the accounts of the December 2015 and the subsequent years, the cost of the asset would be treated as revaluated amount by considering revaluation model of IAS 16 (Alexander & Archer, 2008; Greuning & Koen,