Fashion plc has a main office building purchased for 1,200,000 two years ago, and currently used...

 

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Fashion plc has a main office building purchased for £1,200,000 two years ago, and currently used for the business operations. On 31 March 2020, the main office building was revaluated to £997,500. On 1 April 2020, Fashion purchased a small building in Oxford Street for £800,000, which was ideal for showroom. However, the management changed the initial plan and let out the small building in Oxford Street to a non-related third party at a commercial rent. On 31 March 2021, the current fair values of the main office building and the small building rented out were determined as £1,180,000 and £900,000, respectively. The properties are depreciable at the rate of 5% on cost. Fashion plc follows the fair value model to account for properties. Required: With justification, show how the changes in the market values of the properties should be recorded in the financial statements of Fashion plc on 31 March 2021 under International Financial Reporting Standards. Fashion plc has a main office building purchased for £1,200,000 two years ago, and currently used for the business operations. On 31 March 2020, the main office building was revaluated to £997,500. On 1 April 2020, Fashion purchased a small building in Oxford Street for £800,000, which was ideal for showroom. However, the management changed the initial plan and let out the small building in Oxford Street to a non-related third party at a commercial rent. On 31 March 2021, the current fair values of the main office building and the small building rented out were determined as £1,180,000 and £900,000, respectively. The properties are depreciable at the rate of 5% on cost. Fashion plc follows the fair value model to account for properties. Required: With justification, show how the changes in the market values of the properties should be recorded in the financial statements of Fashion plc on 31 March 2021 under International Financial Reporting Standards.

Answer rating: 100% (QA)

The IFRS requires that the changes in the market values of the properties should be recorded in the financial statements of Fashion plc on 31 March 20... View the full answer