Tutorial 3 – Combined assets:

Green Properties Ltd is situated in Delmas and owns 3 buildings that are classified as follows:

• Building A which is classified as Property Plant and Equipment

• Building B which is classified as Property Plant and Equipment
• Building C which is classified as Investment Property

The reporting date of the entity is 31 December.

Building A:
Green Properties bought Building A on 1 January 2017 at a cost price of R1 000 000 and brought it into
use immediately. The company depreciates this building over its useful life of 20 years. During the
2018 financial year Delmas got hit by a big tornado on 1 July 2018 and building A got damaged. An
expert determined the “value in use” for building A at R600 000 and the “fair value less cost to sell” at
R500 000. During the current reporting period there was a change in the observable inputs when
valuing property in the Delmas area. An expert valued the recoverable amount to be R1 200 000 as at
31 December 2019.

Required
Please provide the calculations and the journals for the above scenario.

Building B:
Green Properties bought Building B on 1 January 2017 for R1 000 000 and took it into use on that date.
The company depreciates this building over its useful life of 20 years. During the 2018 financial year
Delmas got hit by a big tornado on 1 July 2018 and building B got damaged. Due to the severe damage
to the building, management decided to sell it. They appointed an agent accordingly to market the
building and advise them on a fair price to sell the building in its current condition on that date. They
stressed the fact that they wanted the sale to be finalised within one year from the date that they
made the decision to sell it. On 1 July 2018 the fair value was determined by the agent to be R733
333. The costs to sell amounts to 10% of the selling price. Management subsequently set up a meeting
whereby they drew up a plan stating their commitment to sell the asset. The agent was actively
seeking a buyer during the year and the building was subsequently sold on 29 February 2019 for R700
000. As at 31 December 2018 the fair value less costs to sell amounted to R692 000.

Required
Please provide the calculations and the journals for the above scenario and discuss whether the IFRS
5 criteria has been met to classify the building as held for sale.

Building C:
Green Properties bought Building C on 1 January 2017 for R1 000 000 and classified it as an Investment
Property. Green Properties measures investment property in terms of the fair value model. At the end
of the 2017 reporting period, the fair value of Building C was R750 000. At the end of the 2018
reporting period the fair value was R700 000. At the end of the 2019 reporting period the fair value
was R710 000.

Required
Please provide the calculations and the journals for the above scenario.

Additional information:
Please ignore all VAT implications.