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    1. The document outlines an assignment involving the accounting treatment of investment properties under three different models: cost, revaluation, and fair value. It asks students to analyze entry scenarios over multiple years and address challenges in financial analysis and reporting that arise from the different models. 2. Students are asked which model provides the most relevant and reliable information and how each affects balance sheets and income statements. They must also consider which model the CEO of Land Securities should adopt and whether the FASB should allow the fair value model in the US.

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    1. The document outlines an assignment involving the accounting treatment of investment properties under three different models: cost, revaluation, and fair value. It asks students to analyze entry scenarios over multiple years and address challenges in financial analysis and reporting that arise from the different models. 2. Students are asked which model provides the most relevant and reliable information and how each affects balance sheets and income statements. They must also consider which model the CEO of Land Securities should adopt and whether the FASB should allow the fair value model in the US.

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    © All Rights Reserved
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    93 views1 page

    Land Secruities Group

    Uploaded by

    Carey Cai
    1. The document outlines an assignment involving the accounting treatment of investment properties under three different models: cost, revaluation, and fair value. It asks students to analyze entry scenarios over multiple years and address challenges in financial analysis and reporting that arise from the different models. 2. Students are asked which model provides the most relevant and reliable information and how each affects balance sheets and income statements. They must also consider which model the CEO of Land Securities should adopt and whether the FASB should allow the fair value model in the US.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Financial Statement Analysis and Valuation

    MBA 8009|Fall 2018


    Professor Robert Stoumbos

    Land Securities Group (105014) - Assignment #2*

    Assignment questions:

    1. Assume there are three separate real estate companies. US Realty (which applies the cost
    model), UK Realty (which applies the revaluation model), and International Realty (which
    applies the fair value model). Assume also that on December 31, 2003, each company pays
    £1,000 cash to obtain an investment property comprising land with negligible value and an
    office building worth £1,000. The building has a 10-year useful life, has no residual value,
    and is expected to provide a constant stream of economic benefits over time.

    What is the accounting entry for each company for the following four scenarios:

    a. On December 31, 2003, at acquisition


    b. On December 31, 2004, assuming the investment property fair value is £1,300.
    c. On December 31, 2005, assuming the investment property fair value is £1,100.
    d. On December 31, 2006, assuming the investment property fair value is £500.

    Using the above illustrations, as well as Exhibit 11, as references, what financial analysis
    challenges arise as a result of these different accounting models?

    2. Which model (cost, revaluation, or fair value) provides the most relevant information? Which
    model provides the most reliable information?

    3. How does each model affect Land Securities' balance sheet? Income Statement? Can the firm
    assess the impact of adopting the fair value model on previous years' key performance
    metrics, such as "profit on ordinary activities"?

    4. As the CEO of Land Securities, which model, cost or fair value, would you adopt? Why?

    5. The FASB and IASB are actively seeking to eliminate differences between U.S. and
    international accounting standards. However, investment properties are reported under the
    cost model in the U.S., while IFRS allows either the cost or the fair value model. Should the
    FASB allow the fair value model?

    *Individual students or teams of two students will need to hand in three out of six case
    assignments.

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