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A company's note states: "Land not registered in the name of the company has been given for the use of group companies" — with no other related disclosures. Under good financial reporting practice, this note:
AIs AMBIGUOUS — it raises questions about whether the land has been capitalised in books; a better note would integrate this disclosure with the PPE note (asterisk on land item) and explain the registration status + lease arrangement
BIs acceptable as a standalone note in the accounting policies section
CIs required only for unlisted private limited companies
DShould be removed entirely — internal land arrangements are confidential
Answer & Solution
Correct answer: A. Is AMBIGUOUS — it raises questions about whether the land has been capitalised in books; a better note would integrate this disclosure with the PPE note (asterisk on land item) and explain the registration status + lease arrangement
An isolated note without context about the land's capitalisation, the lease terms to group companies, or the registration progress is ambiguous. The better practice (per the chapter) is to integrate with the PPE note: explicit asterisk on the land line, the area not yet registered, the lease to group companies, and the registration progress. This serves user comprehension and avoids misinterpretation.
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