Paper Street Soap Company Ltd conducts a business that makes luxury soaps. It operates a factory in
Question:
Paper Street Soap Company Ltd conducts a business that makes luxury soaps. It operates a factory in Oyster Bay near Sydney. The factory contains a large amount of equipment that is used in the manufacture of soap. Paper Street Soap Company Ltd owns both the factory and the land on which the factory stands. The land was acquired in 2013 for $500 000 and the factory was built in that year at a cost of $1 162 000. Both assets are recorded at cost, with the factory having a carrying amount as at 30 June 2021 of $630 000. In recent years a property boom in Perth has seen residential house prices double. The average price of a house is now approximately $1 500 000. A property valuation group used data about recent sales of land in the area to value the land on which the factory stands at $2 200 000. The land is now considered prime residential property given its closeness to the city and, with its superb ocean views, its suitability for building executive apartments. It would cost $300 000 to demolish the factory to make way for these apartments to be built. It is estimated that to build a new factory on the current site would cost around $1 870 000. The directors of Paper Street Soap Company Ltd want to measure both the factory and the land at fair value as at 30 June 2023. Required:
Discuss how you would measure these fair values.
Financial Reporting
ISBN: 9780730396413
4th Edition
Authors: Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes