Exercises IAS 40
EX1: Initial recognition and measurement
On 1 January 20.1, Wise Limited acquired an investment property for R11 million. The
purchase agreement provided for settlement in full on 31 December 20.1 (an appropriate
discount factor is 10%). R1 million transfer duty and R20 000 legal fees were incurred and
paid during January 20.1 in respect of the acquisition of this property. Rates for the year
ended 31 December 20.1 of R100 000, were paid on 30 November 20.1. All amounts given
are exclusive of value added tax.
During 20.1, Wise Limited constructed an investment property, expenditure on which is
detailed below: • Labour: R2 million (R200 000 of which was incurred due to restore faulty
work performed by ‘scab’ labourers whilst the company’s employees were on strike and a
further R100 000 was in respect of unproductive time whilst waiting for the foundations to
dry); • Materials: R8 million (R1 000 000 of which was incurred to restore faulty work
