Classification of Property as Investment Property
Background: Entity is engaged in the business of development of a special economic zone and industrial park. For development of SEZ, the Entity has purchased, and Government has awarded large parcels of land to the entity. The Company shall develop the land and shall create infrastructure on such land before selling/ leasing the plots to the other businesses. Thus, some portion of land with the entity will be sold in ordinary course of business and some shall be provided on finance lease. Consequently that land shall be classified and presented as “inventory” as per IAS 2 / Ind AS 2 – Inventories in the books of the entity. Due to some legal issues, there are uncertainties regarding the usage of the land and entity is uncertain about the exact usage of the land i.e., whether it will be sold or given on finance lease or operating lease on the date of reporting. Few queries with respect to the accounting of such property have been raised as below. As a part of this blog, we will analys