Question
(a) After initial recognition for an entire class of property, plant and equipment, an entity is required to choose either,(a)the cost model or (b) the revaluation model as its accounting policies. Write a short explanation about the two models.
(b) On 12 November 20x6,Jeng Ting Ltd acquired land on a remote island at a cost of $300,000.This land was held for development as a resort which would take place when transport to the island was made available. At each reporting date, Jeng Ting ltd made the following assessments of the net selling price of the land and the value of the land to the business if kept for future use:
Date Net selling price value in use
31 December2006 $350,000 $400,000
31 December2007 $290,000 $330,000
31 December2008 $280,000 $250,000
31 December2009 $320,000 $310,000
(I) Using the cost model, at what amount could the land be reported in the statement of financial position of Jeng Ting Ltd for each reporting date? Describe your answers.
(ii) Suppose that on 12 November 20x9, the government cancelled all plans to give transport to the island. Jeng Ting Ltd is unable to sell off the land; the cost to Jeng Ting Ltd of developing transport exceeds the current value of expected future benefits of operating the resort. How should Jeng Ting Ltd account for this event?
(c) In preparing its financial statements to comply with the IFRS, an entity can select to depart from a particular IFRS as long as it has proper disclosure. Determine and comment on this statement.