a. Treatment of the Three Properties in Financial Statements

• Dansoman Property (Used as Head Office): This property is owner-occupied for operational purposes, such as administrative functions in the real estate business. It should be treated as property, plant, and equipment (PPE) in the financial statements, measured at cost less accumulated depreciation and impairment losses, or at revalued amount under the revaluation model. Depreciation is charged systematically over its useful life. In practice, for a Ghanaian real estate firm like Black Trust, this ensures compliance with BoG’s Corporate Governance Directive 2018, which emphasizes accurate asset reporting to reflect true financial health, avoiding overstatement that could mislead lenders during credit assessments, as seen in the 2017-2019 banking cleanup where misclassified assets contributed to failures like Capital Bank. Applicable standard: IAS 16 Property, Plant and Equipment.
• East Legon Hills Property (Let to and Occupied by a Subsidiary): This is held to earn rentals or for capital appreciation, as it’s leased to a related party (subsidiary). Despite the related party aspect, it qualifies as an investment property because it’s not owner-occupied and generates rental income. It should be measured at fair value with changes recognized in profit or loss, or at cost if fair value cannot be reliably determined. In consolidated statements, intra-group leases might be eliminated, but in separate financial statements, it’s still investment property. For Black Trust, this classification supports transparent reporting under IFRS, aligning with BoG’s sustainable banking principles as of 2025, where fair value adjustments help assess post-DDEP recovery risks in property portfolios, similar to how Access Bank Ghana evaluates investment properties for liquidity. Applicable standard: IAS 40 Investment Property.
• Kasoø New Town Property (Part of Buildings Constructed for Sale): This is held for sale in the ordinary course of business, as Black Trust is in the business of building and selling properties. It should be treated as inventory, measured at the lower of cost and net realizable value, with costs including construction and direct expenses. Revenue is recognized upon sale under IFRS 15. Practically, this prevents capitalization as PPE, ensuring quick turnover reflection in working capital, crucial for BoG-compliant liquidity risk management in real estate financing, as mismanagement of such inventories led to issues in the 2017-2019 cleanup. Applicable standard: IAS 2 Inventories.

   b. IAS 16 Property, Plant and Equipment

i. Property, plant, and equipment (PPE) under IAS 16 is defined as tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and are expected to be used during more than one period. Examples include buildings, machinery, and vehicles in a banking context, like ATM machines or branch offices at GCB Bank, where PPE supports operational resilience post-2022 DDEP impacts.

ii. The criteria for recognizing an item of property, plant, and equipment under IAS 16 are:

• It is probable that future economic benefits associated with the item will flow to the entity (e.g., through revenue generation or cost savings, assessed via cash flow projections).
• The cost of the item can be measured reliably (including purchase price, import duties, non-refundable taxes, and directly attributable costs like installation).
  In real-world application, for Stanbic Bank Ghana acquiring new IT infrastructure under the Cyber and Information Security Directive 2020, recognition only occurs if benefits like enhanced digital banking efficiency are probable and costs are verifiable, ensuring BoG approval for capital expenditures aligned with Basel III adapted standards. (3 marks)

           iii. Five disclosure requirements for inventories under IAS 2 Inventories include:

• The accounting policies adopted in measuring inventories, including the cost formula used (e.g., FIFO, weighted average).
• The total carrying number of inventories, classified appropriately (e.g., raw materials, work-in-progress, finished goods).
• The carrying number of inventories carried at fair value less costs to sell.
• The amount of inventories recognized as an expense during the period (cost of sales).
• The amount of any write-down of inventories to net realizable value and the amount of any reversal of write-downs.