On 1 January 2021, Nobleman plc agreed to buy a luxury property in London for 12...

 

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On 1 January 2021, Nobleman plc agreed to buy a luxury property in London for £12 million from Aristocrat plc. Contracts were exchanged in June 2021 and over the six-month period from the agreement to the exchange of the contracts, London's property prices had significantly risen. Belgravia plc sold an identical property for £15 million. e Nonetheless, in order to honour the gentlemen's agreement stipulated with the chief executive of Nobleman plc, the director of Aristocrat plc agreed to exchange contracts at the original price of £12 million. The legal costs to Nobleman ple of buying the property were £120,000 and the selling costs to Aristocrat plc were £180,000. e Nobleman ple estimates that from the ownership of the property they can derive an annuity of £1 million per year for the following 30 years, The cost of capital is expected to remain constant at 5%. (a) From the data provided in the question, identify various values for the initial measurement of the property in the financial statements of Nobleman plc. 8 Marks (b) Paradox ple, a company operating within the pharmaceuticals sector, is reviewing the fair value of certain assets in accordance with IFRS 13 Fair Value Measurement. The company carries an asset that is traded in different markets and is uncertain as to which valuation it should use. Under IFRS, the asset has to be valued at fair value. Paradox ple currently buys and sells the assets in the Asian market. The data in relation to the asset is set out below:e American European market 8 million Asianee Year to 31 December 2020e Volume of market – unitse Price market market 4 millione £88ee £12ee 16 million £76 £64 Cost of entering the market Transaction costs £8 £8€ £4 £8€ £8e Discuss, with relevant computations, how Bronson plc should fair value' the above asset. 6 Markse For (a) 1. Using market prices, what is the initial 'fair value' of the property to be recorded in the financial statements of Nobleman plc? e 2. Using entity specific prices, what is the initial 'net realisable value' of the property for Nobleman plc? 3. Using entity specific prices, what is the initial 'replacement cost' of the property for Nobleman plc?e 4. Using entity specific prices, what is the initial 'value in use' of the property for Nobleman plc?e 5. Using entity specific prices, what is the initial 'recoverable amount' of the property for Nobleman plc? 6. Using entity specific prices, what is the initial 'deprival value' of the property for Nobleman plc? 7. Using entity specific prices, what is the initial 'historical cost' of the property for Nobleman plc? For (b) 71. In accordance with IFRS 13 Fair Value Measurement, what is the 'principal market for the asset?e 2. In accordance with IFRS 13 Fair Value Measurement, what is the 'most advantageous market' for the asset?De On 1 January 2021, Nobleman plc agreed to buy a luxury property in London for £12 million from Aristocrat plc. Contracts were exchanged in June 2021 and over the six-month period from the agreement to the exchange of the contracts, London's property prices had significantly risen. Belgravia plc sold an identical property for £15 million. e Nonetheless, in order to honour the gentlemen's agreement stipulated with the chief executive of Nobleman plc, the director of Aristocrat plc agreed to exchange contracts at the original price of £12 million. The legal costs to Nobleman ple of buying the property were £120,000 and the selling costs to Aristocrat plc were £180,000. e Nobleman ple estimates that from the ownership of the property they can derive an annuity of £1 million per year for the following 30 years, The cost of capital is expected to remain constant at 5%. (a) From the data provided in the question, identify various values for the initial measurement of the property in the financial statements of Nobleman plc. 8 Marks (b) Paradox ple, a company operating within the pharmaceuticals sector, is reviewing the fair value of certain assets in accordance with IFRS 13 Fair Value Measurement. The company carries an asset that is traded in different markets and is uncertain as to which valuation it should use. Under IFRS, the asset has to be valued at fair value. Paradox ple currently buys and sells the assets in the Asian market. The data in relation to the asset is set out below:e American European market 8 million Asianee Year to 31 December 2020e Volume of market – unitse Price market market 4 millione £88ee £12ee 16 million £76 £64 Cost of entering the market Transaction costs £8 £8€ £4 £8€ £8e Discuss, with relevant computations, how Bronson plc should fair value' the above asset. 6 Markse For (a) 1. Using market prices, what is the initial 'fair value' of the property to be recorded in the financial statements of Nobleman plc? e 2. Using entity specific prices, what is the initial 'net realisable value' of the property for Nobleman plc? 3. Using entity specific prices, what is the initial 'replacement cost' of the property for Nobleman plc?e 4. Using entity specific prices, what is the initial 'value in use' of the property for Nobleman plc?e 5. Using entity specific prices, what is the initial 'recoverable amount' of the property for Nobleman plc? 6. Using entity specific prices, what is the initial 'deprival value' of the property for Nobleman plc? 7. Using entity specific prices, what is the initial 'historical cost' of the property for Nobleman plc? For (b) 71. In accordance with IFRS 13 Fair Value Measurement, what is the 'principal market for the asset?e 2. In accordance with IFRS 13 Fair Value Measurement, what is the 'most advantageous market' for the asset?De

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a From the data provided in the question the following values can be identified for the initial measurement of the property in the financial statement... View the full answer