...IAS 40 International Accounting Standard 40 Investment Property This version includes amendments resulting from IFRSs issued up to 31 December 2010. IAS 40 Investment Property was issued by the International Accounting Standards Committee in April 2000. In April 2001 the International Accounting Standards Board (IASB) resolved that all Standards and Interpretations issued under previous Constitutions continued to be applicable unless and until they were amended or withdrawn. In December 2003 the IASB issued a revised IAS 40. Since then, IAS 40 and its accompanying documents have been amended by the following IFRSs: • • • • • • • IFRS 2 Share-based Payment (issued February 2004) IFRS 4 Insurance Contracts (issued March 2004) IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (issued March 2004) IAS 1 Presentation of Financial Statements (as revised in September 2007)* Improvements to IFRSs (issued May 2008)* IFRS 9 Financial Instruments (issued November 2009)† IFRS 9 Financial Instruments (issued October 2010).† * † effective date 1 January 2009 effective date 1 January 2013 (earlier application permitted) © IFRS Foundation A1003 IAS 40 CONTENTS INTRODUCTION paragraphs IN1–IN18 INTERNATIONAL ACCOUNTING STANDARD 40 INVESTMENT PROPERTY OBJECTIVE SCOPE DEFINITIONS RECOGNITION MEASUREMENT AT RECOGNITION MEASUREMENT AFTER RECOGNITION Accounting policy Fair value model Inability to determine fair value reliably Cost model TRANSFERS...
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... III Pennsylvania State University Edward J. Riedl * Harvard Business School Thorsten Sellhorn Ruhr-Universität Bochum PRELIMINARY – PLEASE DO NOT QUOTE WITHOUT PERMISSION December 2007 ABSTRACT: We examine the determinants of investment property firms’ choice to use the cost or fair value model to account for their primary asset, real estate. Our examination exploits the European Union’s adoption of International Financial Reporting Standards, which require firms to make this choice under IAS 40 – Investment Property. We hypothesize and find evidence that firms are more likely to choose the fair value model when the firm’s pre-IFRS domestic standards permitted or required fair values on the balance sheet, and when the firm exhibits a greater commitment to reporting transparency. We also find limited evidence that firms are more likely to choose the fair value model when ownership is more dispersed, and when the property market in which they operate has higher liquidity. Overall, our results reveal both the occurrence and causes of variation in firms’ reporting choices when differing accounting treatments are permitted. Key Terms: Fair value, accounting choice, IFRS, real estate, investment property, IAS 40 JEL Classification: M41, G15, G38 Acknowledgements: We appreciate useful discussion and data assistance from the following persons and their affiliated institutions: Hans Gronloh and Laurens te Beek of EPRA; Simon Mallinson of IPD; and...
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...Statement of Financial Accounting Standards No. 13 FAS13 Status Page FAS13 Summary Accounting for Leases November 1976 Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, P.O. BOX 5116, NORWALK, CONNECTICUT 06856-5116 Copyright © 1976 by Financial Accounting Standards Board. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Standards Board. Page 2 Statement of Financial Accounting Standards No. 13 Accounting for Leases May 1980 CONTENTS Paragraph Numbers Introduction ................................................................................................................ 1– 4 Standards of Financial Accounting and Reporting: Definitions of Terms .................................................................................................. 5 Classification of Leases for Purposes of This Statement ........................................... 6 Criteria for Classifying Leases (Other Than Leveraged Leases).......................... 7– 9 Accounting and Reporting by Lessees .............................................................. 10– 16 Accounting and Reporting by Lessors............................................................... 17– 23 Leases Involving Real Estate.........................
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...GLOBAL ACCOUNTING A. International Accounting proposed that the Nations of the world should be reporting their economic activities in accounting with some general understanding. Examine this statement? B. SAS 9: Accounting for Depreciation. You are required to discuss the requirement of this standard and compare its provisions with International Accounting? A. International Accounting is saddled with the responsibility of preparing and presenting financial statements that provide financial information about the financial position, financial performance, and changes in cash flow of a global business; and shows the result of management’s stewardship of resources in their care. These financial statements are useful to a wide range of users across the globe in making economic decisions. Financial statements comprises of a balance sheet, a profit and loss account, a statement of changes in equity, a cash flow statement, and notes comprising a summary of significant accounting policies and other explanatory notes (IAS 1). The accounting report is a major way of getting a picture of what a company is doing and how it has been performing over the years (Walton and Aerts, 2006). The information in these financial statements, quantitative and qualitative in nature, should be simple, clear, and easily understood by all users. The users includes individuals, group of investors, or financial institutions who need to determine the liquidity , profitability, and viability of...
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...any liability and responsibility to any person, who acts or fails to act as a consequence of reliance upon the whole or any part of the contents of this publication. Contents Chapter 1 – Introduction • Geography • Climate • • • • • • • • • • • 6 6 6 6 7 7 8 8 9 9 10 10 11 ¡ ¢ Language and Currency Legal System Advantages of Investing in Korea Constitution Economy Import Controls Major Exports and Imports Communications Finance Government Policy on Foreign Investment in Korea Exchange Controls Chapter 2–Business Forms Available to Foreign Investment • • • • • • 13 £ ¢ £ ¢ Local Corporation Establishment Private Business Registration Establishment of a Foreign Company's Domestic Branch Directors Registration requirements and filing procedures for public securities Shareholdings by non-residents Chapter 3 – Accounting • • • Business Accounting Standards Audit Policies External Audit Policy © 18 . 18 19 19 19 Introduction of the International Financial Reporting Standards § ¨ ¤ ¥ ¦ ¥ ¦ ¥ Chapter 4 – Taxation • • • • 21 21 Introduction Fiscal Year Lodgement of returns National Taxes Corporate Tax © 21 21 22 22 26 27 28 29 Personal Income Tax © Capital Gains Tax...
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...strategies that advocate portfolio assembly over individual property selection may be defective. Each step of the appraisal process involves an unknown amount of estimation error. The combination of these errors is unlikely to produce a perfect, error-free estimate of value. Thus, appraisal error is virtually unavoidable. Investors need reasonable estimates of value when buying, selling, or retaining commercial property, so an unknown amount of appraisal error adds uncertainty to the decision-making process. Despite the uncertainty, investors have learned to make allowances for appraisal error in their decision-making processes. The way in which real estate investors interpret appraisal errors has a material effect upon the decisions that they make. In particular, the predominant belief among real estate professionals is that appraisal error is random. This belief materially influences investor attitudes toward portfolio management and the valuation process itself. Lack of understanding of the relative magnitudes of random and nonrandom components of total appraisal error has consequences for optimal portfolio strategies. For example, investors who deem the bulk of total appraisal error to be random may reasonably conclude that error in estimates is beyond their control or influence. To minimize total portfolio valuation error, such investors may assemble large, diverse portfolios even though the cost of owning an array of properties of various types and in various locations is expensive...
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...“THE MARKET FOR COMMERCIAL PROPERTY IS EFFICIENT” DISCUSS By: AKINDELE, DOLAPO BOSE Word Count: 2,807 FACULTY OF BUILT ENVIRONMENT UNIVERSITY OF THE WEST OF ENGLAND BRISTOL 1.0 INTRODUCTION The commercial property, as we aware, is one aspect of the property market but with a much increasing velocity, it has fast become a market to be reckoned with. Not only is it viewed as just a market type, it is now a major consideration for investors. Direct investment by UK institutions and overseas investors, attracted by the long leases and secure income, have poured huge investment into commercial property, and the market has provided an enormous valuable alternative to gilts and equities (Harris R. 2005). Though the property industry will appear to be insignificant when compared to other sectors with only two property companies, Land Securities and Canary Wharf, qualifying for inclusion in the FTSE 100, the top 100 companies by market capitalisation (value of shares), as at April 2001, importance is placed on the commercial property sector (Freeman, 2005). The property market is also of consideration to the government as well because as much as it is contributing to the economic growth of the nation – as at the end of 2003, the total value of the commercial property stock was a whopping £611bn (RICS, 2005) – it is beclouded by its own issues and failures. This purpose of the paper is to examine the commercial property market, its dynamism i.e. driver...
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...businesses, form a partnership to share markets, intellectual property, assets, knowledge, and, of course, profits. It involves coming together of different business entities, which contributes a combination of subsets of assets for a specific business purpose and a limited duration. It is essentially a medium to long-term contract which is specific and flexible. Joint Venture is all about combining of strengths of different business concerns into one organization. Though the joint venture represents a newly created business enterprise, its participants continue to exist as separate firms. A joint venture can be formed as a partnership firm, limited liability partnership or a company or any other form of business organization which the participating firms choose to select. It generally has the following characteristics: * Right of mutual control or management of the enterprise. * Right to share in the property. * Joint property interest in the subject matter of the venture. * Contribution by partners of money, property, effort, knowledge, skill or other assets to the common undertaking b. Consistent with U.S. GAAP, Abbott uses the equity method to account for its joint venture in TAP Pharmaceutical Products (TAP). Briefly explain this accounting method. An accounting technique used by firms to assess the profits earned by their investments in other companies. The firm reports the income earned on the investment on its income statement and the reported value is based...
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...in U.S is Pharmaceutical industry . Supreme pledge to research and development is main reasons for its success. Intellectual property protection has a goal to insure return on investment and future profits. Discovering and testing a new drug is a process that requires approval from regulatory agencies in the United States and Europe. This process might cost millions of dollars per new product. After such a large investment has been made, next step is to obtain approvals in other nations. This approval is necessary so that new product can be sell as widely as possible. The main risk that pharmaceutical industry is facing is imitation. Once a product have been developed to be safe and effective risk is that another firm might enter the market with same or similar products. It is much cheaper and faster to invest in manufacturing process and developing existing and start competing with the pioneering firm with lower prices. If such imitation were widespread and rapid, pioneer company might not have ROI( return on investment) Inequality between drug finding and imitation costs, led pharmaceutical manufacturers to stress on the importance of the patent system. Well developed patent system can allow company to have 20 years of exclusive rights to their invention, in order for them to recover initial investment . Patent protection is one of the main reasons for...
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...Financial Accounting Homework Case I: Land Securities Group Should Land Securities choose the cost or fair value model for reporting its investment property in its consolidated financial statements? a) Explain the financial statement effects of the different models b) Consider the perspectives of management, (current and potential) shareholders and lenders, as well as auditors c) Take into account the different objectives of financial reporting d) Conclude with a well-reasoned decision ------------------------------------------------- Revaluation Model | | | | | | Balance Sheet | | | | Income Statement | | | | 2002 | 2003 | | | 2002 | 2003 | Investment Properties | | | | Revenues | 1.026 | 1.240 | Historical Cost | 4.423 | 4.785 | | Expenses | 762 | 1.010 | Revaluation Reserve | 3.377 | 3.039 | | | | | Open Market Value | 7.800 | 7.824 | | Operating Profit | 264 | 230 | Total Assets | 8.868 | 9.008 | | | | | Liabilities | 2.831 | 3.445 | | | | | Equity | 6.037 | 5.563 | | | | | Total Equity | 8.868 | 9.008 | | | | | Revaluation Model to Cost Model transformation * Revaluation Reserve will be taken out of Balance Sheet (assets and equity) * Assets will be valued at historical costs minus accumulated depreciation (value of total assets will be much less than in the Revaluation Model) * Depreciation of historical costs will have an influence on the income statement (profit will...
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...industry Implications for the real estate and construction industries Contents 1. Introduction 2. Principal impacts of the new standard 3. The definition of fair value 4. The concept of ‘highest and best use’ 4.1 Assessment 4.2 Valuing the highest and best use — alternative use and asset modifications 4.3 Highest and best use and impairment testing 5. The valuation premise for property interests 6. Assessing whether an appraisal complies with IFRS 13 7. Appropriate valuation techniques 8. Applying the fair value hierarchy to real estate appraisals 9. Expanded disclosure requirements 10. Final thoughts 2 2 3 3 3 4 4 5 5 6 7 8 9 IFRS 13 Fair value measurement — 21st century real estate values Implications for the real estate and construction industries 1 1. Introduction IFRS 13 Fair Value Measurement has been recently released by the International Accounting Standard Board (IASB). 2. Principal impacts of the new standard For real estate entities, the adoption of IFRS 13 could result in significant changes to processes and procedures for determining fair value and providing the required disclosures. While the requirement to determine fair value by reference to market participants is not new, the definition of fair value in IFRS 13 differs from that proposed by International Valuation Standards (IVS), which are the generally accepted standards for professional appraisal practice in valuing real estate internationally. The fair value framework set out in IFRS 13 contains specific...
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...Real Estate Industry The laws of real property concern the many aspects of landownership, its use, and its conveyance. Its subjects include estates, ownership, leaseholds, contracts, mortgages, deeds, land titles, recording and more. According to J.P. Wiedemer and J. E. Goeters from their book Real Estate Investment, in real property law, an estate is an interest in land. It is the sum of property rights and/or things affixed to the land, which have a given duration of time (including infinity). An estate is concerned with the land; an ownership is concerned with people. Another definition of Real Estate, according to Dennis J. Mckenzie and Richard M. Betts from their book Essentials of real estate economics 2006 edition, is defined as land, that which is affixed to the land, that which is appurtenant to the land and that which is immovable by law. The ownership of real estate carries certain rights, known as the bundle of rights. The bundle includes the right to use, possess, exclude and dispose. These rights are not absolute; they can be legally modified by private restrictions and government regulations and laws. In short, real estate or real property is land and improvements and the rights associated with the ownership of same. One of the largest and most important investments that the average person makes is a house to live in. In past years, it was considered an acquisition of living accommodations and was expected to decline in value as it grew older and more outdated...
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...Intellectual Property Rights and Economic growth “Imagination is more important than knowledge” – Albert Einstein Albert Einstein’s preference of imagination over knowledge speaks well to the potential capabilities of enterprises and businesses. If a creative idea is discovered, it can be transformed into innovative products. Innovation is instrumental among other things in creating new jobs, providing higher incomes, offering investment opportunities and curing disease. “There is wide agreement that innovation and entrepreneurial activity are the engines of long-run economic growth” (Hill 63). Intellectual property rights have become a significant factor in both creating and using ideas that are translated into knowledge and inventions to promote innovation and economic growth. Through this paper I will discuss the importance of protecting intellectual property and its impact on economic development. What is intellectual property and IPR’s? “Intellectual property refers to property that is the product of intellectual activity” (Hill 54). It might be a poem that you write, a computer software, a mother’s invention of saline Boogie Wipes for babies or a formula for a new drug. Creators can be given the right to prevent others from using their inventions, designs or other creations and to use the right to negotiate payment in return for others to use them. These are “Intellectual property rights”. They allow the creator or owner of a patent, trademark, or copyright...
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...Question; Discuss accounting for investment, clearly indicating the IAS for the disclosure of investment. Accounting for Investments Introduction * This Standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.1 This Standard does not deal with: (a) The bases for recognition of interest, dividends and rentals earned on investments which are covered by Accounting Standard 9 on revenue recognition; (b) Operating or finance leases; (c) Investments of retirement benefit plans and life insurance enterprises; (d) Mutual funds and venture capital funds and/or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 1956. Definitions The following terms are used in this Standard with the meanings assigned: * Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not ‘investments’. * A current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. * A long term investment is an investment other than a current investment. * An investment property is an investment in land or buildings that are...
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...transaction price as the standard and the latest transaction time as the standard and is put through relative evaluation regarding depreciation or the amount of appreciation, after which the tax is imposed based on the actual price. Various relationships of rights, for example debt and etc. if one only takes in financial factors into consideration, has a direct effect on the real estate price and ultimately also effects the taxation. Generally, such acquisition price becomes the actual payment amount during real estate acquisition but in cases in which real state is acquired through Like Kind Exchange method, the new real estate standard price is as follows; if there was additional receipt of separate cash in addition to the book value of the real estate already in possession, it is the amount with the deduction of the same, and if cash or other values were paid in addition, it is the amount with the addition of the same. Furthermore, during the purchase of real estate, if the purchase was completed on the condition of assumption of existing debt on the acquired real estate, the acquisition cost is the sum of cash price actually paid and assumed debt. 2.Parts related to ownership of real estate Real estate tax is a part of local tax and in the United States, only the property tax is imposed by local government. Fair market value of land and building are taken as standard for assessment in property tax. 35 states all impose the equal rate of tax on property and Washington D.C....
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