# Land Mark Solution Harvard Case Solution & Analysis

 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 ` 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)

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.

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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