Nickel Corporation uses the fair value model of accounting for its investment property. The fair values of its property were: December 31, 2020, $ 180,000 and December 31, 2021, $ 195,000. At December 31, 2021, Nickel should
A) recognize a gain of $ 15,000 in income.
B) report a gain of $ 15,000 in other comprehensive income.
C) defer the gain until the property is sold.
D) do nothing (ignore it).

Question

Quizplus · Accepted Answer

According to the fair value model of accounting, changes in fair value of investment property should be recognized in income in the period in which they occur. Thus, the increase in fair value of $15,000 should be recognized in income in the current year, so the correct answer is A. Choice B is incorrect because gains or losses recognized in other comprehensive income under the fair value model are limited to gains or losses from changes in fair value of financial assets available for sale. Choice C is incorrect because deferring the gain until the property is sold would not follow the fair value model of accounting. Choice D is incorrect because recognizing the gain in income is required under the fair value model of accounting.

Nickel Corporation Uses the Fair Value Model of Accounting for Its