A client has bought land on which it will construct villas and then it will sell the villas together with the land.
Currently it cannot construct the villas because it has not yet obtained the licence.
The company is in the process of applying for the license. If it obtains the licence then it will start construction.
Should land currently be classified as inventory (ias 2) or investment property (ias 40)?
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Land - investment property or inventory
Replies (5)
If intention of the organizer is clear about development &/or construction of the land, it will be classified as inventory.
Thanks Dhirajlal.
What would happen if the company did not obtain the license, meaning that it cannot construct and sell the villas?
I was thinking to classify it as investment property initially and then if it obtains the license, we transfer to inventory. What is your view?
What would happen if the company did not obtain the license, meaning that it cannot construct and sell the villas?
I was thinking to classify it as investment property initially and then if it obtains the license, we transfer to inventory. What is your view?
No issue. You can proceed with the concept. Only thing there may arise capital gain tax liability if the time period lapsed pretty long, for conversion from investment to inventory.
Thanks Dhirajlal for the clarification.
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