Consider the following three properties in context of IAS 40 Investment property:

1. A property is held by Adam, a lessee, as a right-of-use asset. Adam uses the property to earn rental income. The lease is accounted for by the lessor as a finance lease, on the basis that ownership of the property will transfer to Adam at the end of the lease.

2. A property is held by Eve, a lessee, as a right-of-use asset. Eve uses the property to earn rental income, The lease is accounted for by the lessor an operating lease, on the basis that ownership of the property will not transfer to Eve at the end of the lease.

3. A property is held by Cain, a lessee, but where Cain expenses the property rentals in terms of the recognition exemption allowed in IFRS 16 (i.e. Cain does not account for the property as a right-of-use asset). Cain uses the property to earn rental income. The lease is accounted for by the lessor an operating lease, on the basis that ownership of the property will not transfer to Cain at the end of the lease.

(Choose one correct option only)