Question of the Week – Financial Reporting and Analysis

The first question you should ask here is the
classification of land. Is it PPE (Property, Plant, Equipment) or investment
land? Since it is being used for generating income (rather than for
operations), it is investment land.

How does IFRS allow valuation of investment land? Either
at cost or at market price. XYZ must choose a method and be
consistent with it, but XYZ is allowed to choose either method. Since XYZ is
holding the land for a long time, they may choose to value it at cost so as to
not be affected by market volatility.