Land Mark Solution Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Answer of 1^st question:

Double Entries Under Cost Model according to IAS 40 INVESTMENT PROPERTIES

Date	Particular	Debit	Credit

31-Dec-03	Land	£ 1,000.00
	Building	£ 1,000.00
	Bank		£ 2,000.00

31-Dec-04	Depreciation Expense	£ 100.00
	Investment Property		£ 100.00

31-Dec-05	Depreciation Expense	£ 100.00
	Investment Property		£ 100.00

31-Dec-06	Depreciation Expense	£ 100.00
	Investment Property		£ 100.00

31-Dec-06	Impairment Loss	£ 200.00
	Investment Property		£ 200.00

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Double Entries Under Revaluation/Fair Value Model according to IAS 40 INVESTMENT PROPERTIES

Date	Particular	Debit	Credit

31-Dec-03	Land	£ 1,000
	Building	£ 1,000
	Bank		£ 2,000

31-Dec-04	Depreciation Expense	£ 100
	Accumulated Depreciation on Building		£ 100

31-Dec-04	Investment Property	£ 400
	Revaluation Reserve		£ 400

31-Dec-05	Depreciation Expense	£ 144
	Accumulated Depreciation on Building		£ 144

31-Dec-05	Investment Property	£ 44
	Revaluation Reserve		£ 44

31-Dec-06	Depreciation Expense	£ 138
	Accumulated Depreciation on Building		£ 138

31-Dec-06	Revaluation Reserve	-£ 218
	Investment Property		-£ 218

Land Mark Solution Harvard Case Solution & Analysis

Calculation:

Calculation of fair value on Cost Model
Particular	2003	2004	2005	2006

Historical Cost of Building	1,000	1,000	1,000	1,000
Depreciation Expense	-	100	100	100
Accumulation Depreciation on Building	-	100	200	300
Net Book Value	1,000	900	800	700
Fair Value	1,000	1,300	1,100	500
Impairment Loss	-	400	300	(200)


Calculation of fair value on Revaluation Model
Particular	2003	2004	2005	2006

Historical Cost of Building	1,000	1,000	1,000	1,000
Revaluation	-	-	400	100
Revalued Value	1,000	1,000	1,300	1,100
Depreciation on Building	-	100	144	138
Accumulated Depreciation	-	100	244	382
Net Book Value	1,000	900	1,056	718
Fair Value	1,000	1,300	1,100	500
Revaluation/Impairment	-	400	44	(218)

Answer of 2^nd Question:

Relevant Information and Reliable Information:

According to abunch of IFRS1, IAS 1 and IAS 40 INVESTMENT PROPERTIES, and fundamental accounting, the Reliable Information must be the information that isappropriately true and fair. According to thesamebasis, Relevant Information is that information which is used to make some decision which helps the management.

The cost model provides true and fair values as per historical accounting records, on the ground that it is reliable information of the assets because it has a clear view according to your investment outflow and inflow.

The fair value and revaluation model are adequately same, and evidently itprovides the information for management to make a decision. It is better to give the relevant information to deals to make any decision about theasset.

Answer of 3^rd Question:

Effects on Financial Statement of Cost model and Revaluation model:

The effects of anincrease in thevalue of thecost of an asset will lead the balances of equity high which is adequate in some cases. Like if the company in need of a high amount of loan,forms any financial institution, the company needs to show high values intheir balance sheet to meet the criteria of borrowing.In some cases, it will mislead the organization to record the assets on revaluation model as the company hasto continue with revaluation model if once itdecides to go with it and will lead to some serious problems inrecording, it will increase the expense which are incurred for revaluation. Most of the expertise,havethe opinion to record the assets on the cost model, they have a grand view that revaluation model misleads the organization to affect its going concerns................

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