1, initial measurement
In the initial measurement, the investment real estate measured by the cost model shall be initially measured according to the actual cost at the time of acquisition. This includes the purchase price, related taxes and fees, maintenance fees, etc. In accounting treatment, the "investment real estate" account is debited and the "bank deposit" account is credited.
2. Follow-up measurement
In the subsequent measurement, the investment real estate measured by the cost model shall be measured according to the cost determined at the initial measurement. This means that unless there is evidence that the market value of investment real estate has changed, its book value should remain unchanged.
3, conversion and disposal
Investment real estate measured by the cost model shall be recognized at the book value at the time of conversion or disposal. For example, when an investment real estate is converted into a self-use real estate, the book value should be taken as the book value of the converted fixed assets or intangible assets.
Measuring the advantages of investment real estate with cost model
1, simple operation.
Using cost model to measure investment real estate, its core is to pay attention to the initial cost and subsequent update or depreciation of investment real estate. This measurement method is usually simpler and more direct in accounting treatment. It does not need to consider the change of market price, but only needs to record and amortize according to the initial cost, which reduces the complexity of accounting work to some extent.
2. Enhance stability
Under the cost model, the book value of investment real estate is fixed and is not affected by market fluctuations. This helps to enhance the financial stability of the company. In the case of large market fluctuation, the cost model can avoid the fluctuation of book value caused by market price fluctuation, thus maintaining the stability of financial statements.
3. Provide more reliable asset information.
The cost model focuses on the actual cost of investment real estate, which helps to provide more reliable asset information. For investors and creditors, cost-based accounting information is more reliable. Especially in the absence of an active market, cost information may be more useful for evaluating the actual value of assets and potential investment opportunities.