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Venus Ltd. owns 3 properties bought 1 April 20X1. Properties 1 and 2 (factories) are used by Venus; Property 3 is let out at market rent. Management presents all 3 as PPE, does NOT depreciate any (claims FV exceeds carrying amount), and recognises FV-vs-cost differences in P&L. Under Ind AS:
AIncorrect on classification only — depreciation treatment is correct
BINCORRECT — Property 3 (let out) is INVESTMENT PROPERTY under Ind AS 40 (separate presentation); Property 1 (cost model) must be depreciated; Property 2 + 3 (revaluation/FV model) — revaluation increases go to OCI (not P&L) for PPE; FV changes on Inv. Prop. go to P&L only under FV model election
CCorrect only if disclosed clearly in notes
DCorrect — fair value exceeding carrying amount eliminates depreciation under all Ind AS
Answer & Solution
Correct answer: B. INCORRECT — Property 3 (let out) is INVESTMENT PROPERTY under Ind AS 40 (separate presentation); Property 1 (cost model) must be depreciated; Property 2 + 3 (revaluation/FV model) — revaluation increases go to OCI (not P&L) for PPE; FV changes on Inv. Prop. go to P&L only under FV model election
Multiple Ind AS errors: (a) Property 3 let-out should be Investment Property under Ind AS 40 — separate presentation. (b) Cost model under Ind AS 16 ALWAYS requires depreciation regardless of FV. (c) Revaluation model under Ind AS 16: revaluation surplus goes to OCI (PPE revaluation reserve), not P&L. (d) Investment Property at FV model under Ind AS 40 routes FV changes to P&L — but no depreciation. Each property has its own correct treatment.
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