Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date.
No depreciation has been provided on Investment property, contrary to Financial Reporting Standard 102, which require that provision be made for depreciation of fixed assets having finite useful life. The director is of the opinion that the residual values at the end of the estimated useful lives of the buildings are not likely to be materially different from their carrying values. This is because it is the company's policy to maintain buildings in such condition that their value is not diminished by the passage of time and the relevant expenditure is charged to profit before tax in the year which it is incurred. Therefore, any element of depreciation is considered to be immaterial and no provision is made.
Investment property should be recognised as an asset when it is probable that the future economic benefits that are associated with the property will flow to the entity, and the cost of the property can be reliably measured.
Investment property is remeasured at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Gains or losses arising from changes in the fair value of investment property must be included in net profit or loss for the period in which it arises.
Fair value should reflect the actual market state and circumstances as of the balance sheet date. The best evidence of fair value is normally given by current prices on an active market for similar property in the same location and condition and subject to similar lease and other contracts.