we have a building classified as Investment Property and the management wanted to demolish the building and rebuild it
if we consider the book value is 3M $ what will be the financial effect
is it will be like that
1-derecognize the property and with loss of 3M in the P&L
2-revaluate the land and recognize it as PPE with its value let's say it will be 1M $
3-then when building the new building all costs will be capitalized as work in progress
4-after finishing the building, evaluate it and recognize it as an investment property with the new value
that means in the first year, the effect will be a 3 M loss and 1 M gain or it will be offsetted
if we consider the book value is 3M $ what will be the financial effect
is it will be like that
1-derecognize the property and with loss of 3M in the P&L
2-revaluate the land and recognize it as PPE with its value let's say it will be 1M $
3-then when building the new building all costs will be capitalized as work in progress
4-after finishing the building, evaluate it and recognize it as an investment property with the new value
that means in the first year, the effect will be a 3 M loss and 1 M gain or it will be offsetted