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,