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Question 1 (CFAP-01 D-18)

You are the Finance Manager of Mehran Limited (ML). Your staff has prepared draft financial
statements of ML for the year ended 31 December 2017.
Net profit for 2017 (draft), 2016 (audited) and 2015 (audited) was Rs. 355 million, Rs. 281 million and Rs.
228 million respectively. There was no item of other comprehensive income.
The draft statement of financial position as on 31 December 2017 shows total assets and total liabilities
of Rs. 2,627 million and Rs. 440 million respectively
Property, plant and equipment include a warehouse which was given on rent in January 2017 for two
years. Previously, the warehouse was in use of ML.
ML carries its property, plant and equipment at cost model whereas investment property is carried at
fair value model. Carrying value and remaining useful life of the warehouse on 1 January 2017 was Rs.
55 million and 11 years respectively. Fair values of the warehouse on 1 January 2017 and 31 December
2017 were Rs. 80 million and Rs. 75 million respectively. Depreciation for 2017 has not yet been
charged.
Required:
Determine the revised amounts of total assets and total liabilities after incorporating effects of the
above corrections (05)

Question 2 (CFAP-01 D-18)

Gee Investment Company limited (GICL) acquires properties and develops them for diversified purpose.
i.e. resale, leasing and its own use. GILC applies the fair value model for investment properties and cost
model for property, plant equipment. The details of the buildings owned are as follows:
The following information is also available:
Property Date of Useful life Cost Residual Fair value as on 31
acquisition (years) value December
2011 2010
Rs. in million
B 1 January 2009 15 240 24 240 10
D 1 July 2008 10 10 1 Not available
E 1 August 2011 20 48 4 51 -

Property B The possession of this property was acquired from the tenants on 30 June 2010 when the
company shifted its head office from property C to property B. the fair value on the above date was Rs.
195 million.
Property D This property is situated outside the main city and its fair value cannot be determined. It was
rented to a government organization soon after the acquisition.
Property E this property is an office building comprising of three floors. After acquisition, two floors
were rented out. On 1 November 2011, GICL established a branch office on the third floor.

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Details of cost incurred on acquisition are as follows:

Rs. in million
Purchase price 42.50
Agent’s commission 0.50
Registration fees and taxes 2.00
Administrative costs allocated 3.00
48.0
Required:
Prepare a note on investment property, for inclusion in GICL’s separate financial statements for the year
ended 31 December 2011. (Ignore comparative figures).

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Solution 1

Solution 2
Property B
Since property B was transferred to property plant and equipment on 30 June 2010, it will not be
considered as investment property.
Property D
This property rented out to tenants is situated outside the main city and therefore fair value is not
determinable.
The building is being depreciated over a period of 10 years on straight line method.

Property 2011
Carried at cost Carried at fair value Total
Rupees

E Additions during the year*2 30.00 30.00

D Depreciation*3 (0.90) (0.90)

Fair for value adjustment (W-I) 14.00 14.00

Cost/fair value as on 31 December 10.00 284.00 294.00
Accumulated depreciation (3.15) -- (3.15)
*2: (48 - 3) * 2/3
*3: (Rs. 10m – Rs. 1m)/10

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