Transfers under cost model

1. Transfers under cost model • When an enterprise uses the cost model, transfers between IP, owner-occupied property and inventory do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes. • There is no gains or losses will arise. ACCA P2- Sept 2010

2. Transfers under the fair value model • Transfers should be made only where there is a change of use. Examples are as follows: • i. Transfer from IP to owner-occupied property • The property’s cost for subsequent accounting under HKAS 16 or HKAS 2 should be itsFV at the date of the change in use. • ii. Transfer from IP to inventory • Use the fair value at the date of the change for subsequent accounting under HKAS 2 inventories. ACCA P2- Sept 2010

3. Transfers • iii. Transfer from owner-occupied property to IP • Normal accounting under HKAS 16 will have been applied up to the date of the change. On adopting fair value, there is normally an increase in value. This is recgonised as other comprehensive income and credited to the revaluation surplus in equity in accordance with HKAS 16. If the fair value causes a decrease in value, then it should be charged to profits. • iv. Transfer from inventory to IP • Any difference between the FV of the property on the date of the transfer and its previous carrying amount should be recognised in profit or loss. ACCA P2- Sept 2010