Omega is an entity that owns three properties. All three properties were purchased on 1 October 2004. Details of the purchase price and market values of the properties are as follows:

Properties 1 and 2 are used by Omega as factories whilst property 3 is let to a non-related third party at a commercial rent. Omega does not depreciate any of the properties on the basis that they are valued at market values that are generally expected to increase over time.
Required:
(a) Assess whether Omega's policy of non-depreciation of properties 1-3 is in accordance with international financial reporting standards.
(b) Show how the movements in the carrying amount of each property will be reflected in the fi¬nancial statements of Omega for the years ended 30 September 2005 and 2006. You can assume that any relevant depreciation is immaterial.
Where necessary you should justify your treatment with reference to appropriate international financial reporting standards. Where more than one treatment is permitted under international financial reporting standards you should show the impact of both treatments.

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Purchase price Market value 30 September 2005 Market value 30 September 2006 Property 1 $000 15 000 16 000 17 000 Property 2 $000 10 000 11000 9 000 Property 3 $000 12 000 13 500 14 500