QUESTION TWO

$[20]$

This question comprises two independent parts.

PART A

Space Limited owns an office park that it developed during the current reporting period at a cost of R$200$ million. Space Limited's head office is situated in the office park in a standalone building.

The balance of the office park is let out to tenants under non$-$cancellable operating leases that vary in duration between $3$ and $5$ years. Space Limited intends keeping the office park in its existing use indefinitely.

Required:

Write a letter to the financial director of Space Limited in which you set out how Space Limited should account for the office park. Limit your discussion to the recognition and measurement issues $($i$.$e$.$ ignore presentation and disclosure$).$

Ignore all taxation.

$(10$ marks$)$

PART B

GCG $($Pty$)$ Ltd acquired three two$-$storey buildings with a view to renting them out. The following costs were incurred in acquiring the buildings:

Purchase price

R$1500000$

Property transfer costs

R $40500$

Attorney costs legal services

R $28000$

Borrowing costs

R $5560$

Start$-$up costs

R $30000$

Suitable tenants for the premises have been secured.

REQUIRED:

Calculate the amount at which the buildings will initially be measured at$.$ Support your answer with appropriate explanations in terms of IAS $40.(10$ marks$)$