I IAS 40 Investment Property

.
IAS 40
Investment Property
Overview
✓ OBJECTIVE
✓ SCOPE
✓ DEFINITIONS
✓ CLASSIFICATION OF PROPERTY AS INVESTMENT PROPERTY OROWNER-OCCUPIED

PROPERTY
✓ RECOGNITION
✓ MEASUREMENT AT RECOGNITION
✓ MEASUREMENT AFTER RECOGNITION

✓ Accounting policy
✓ Fair value model
✓ Cost model
✓ TRANSFERS
✓ DISPOSALS
✓ DISCLOSURE
Objective
To prescribe the accounting

investment property and
related Disclosure
requirements.
Scope
 The Standard shall be applied in the recognition,
measurement and disclosure of investment property
 This Standard does not apply to:

(a) biological assets related to agricultural activity and
IAS 16 Property, Plant and Equipment); and
(b) mineral rights and mineral reserves such as oil,

natural gas and similar non-regenerative resources.
Definitions
- IP:
Property (land or a building—or part of a
building—or both) held (by the owner or by
the lessee under a finance lease) to earn
rentals or for capital appreciation or both,
rather than for:
A. use in the production or supply of goods or services or for administrative purposes; or

B. sale in the ordinary course of business.
Classification Of Property As
Investment Property Or
Owner-occupied Property
examples of investment property:
(a) land held for long-term capital

than for short-term sale in the
ordinary course of business.
(b) land held for a currently

undetermined future use.
Continued
(c) a building owned by the entity (or held by the entity
under a finance lease) and leased out under one or more
operating leases.
(d) a building that is vacant but is held to be leased out under
one or more operating leases.
(e) property that is being constructed or developed for future
use as investment property.

Recognition
Investment property
shall be recognized
as an Asset when,
and only when:
(a) it is probable that the future

economic Benefits that are
associated with the investment
property will flow to the entity; and
(b) the cost of the

investment property can
be measured reliably.
Measurement At Recognition
❑An investment property shall be at its cost.
▪ Transaction costs shall be included in the initial
measurement.
Elements of cost
The cost of a purchased investment Property comprises
• (a) its purchase price and;
• (b) Directly attributable expenditure for

. example, professional fees for legal services,
property transfer taxes and other transaction
costs
Measurement After
Recognition
Accounting policy
An entity shall choose either the fair value model or the cost model
Fair value model
❑ After initial recognition, an entity that chooses the fair value model shall
measure all of its investment property at fair value
❑ A gain or loss arising from a change in the fair value of investment property
shall be recognized in profit or loss for the period in which it arises
Continued
Cost
model
After initial recognition, an entity
that chooses the cost model shall
measure all of its investment
properties in accordance with
IAS 16’s requirements for that
model, other than those that
meet the criteria of IFRS 5
.
Disposals
. DISPOSALS
.
Disclosure
An entity shall disclose:
(a) whether it applies the fair value model or the
cost model.
(b) the amounts recognized in profit or loss

Continued
(c) net gains or losses from fair value
adjustments
(d) transfers to and from investment property
(e) the depreciation methods used
(f) the useful lives or the depreciation rates used

Questions and
Discussion
Case Study 1
Facts
– XYZ Plc. and its subsidiaries have provided you, their
International Financial Reporting Standards (IFRS)
specialist, with a list of the properties they own:
– Land held by XYZ Plc. for undetermined future use
– A vacant building owned by XYZ Plc. and to be leased out under an
operating lease
– Property held by a subsidiary of XYZ Plc., a real estate firm, in the
ordinary course of its business
– Property held by XYZ Plc. for the use in production
– A hotel owned by ABC Plc., a subsidiary of XYZ Plc., and for which ABC
Plc. provides security services for its guests’ belongings
Required
Advise XYZ Plc. and its subsidiaries as to which of the
above-mentioned properties would qualify under IAS 40
as investment properties. If they do not qualify thus, how
should they be treated under IFRS?
Thank You

I IAS 40 Investment Property

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✓ CLASSIFICATION OF PROPERTY AS INVESTMENT PROPERTY OROWNER-OCCUPIED

✓ MEASUREMENT AFTER RECOGNITION

✓ Fair value model

To prescribe the accounting

 This Standard does not apply to:

(b) mineral rights and mineral reserves such as oil,

A. use in the production or supply of goods or services or for administrative purposes; or

examples of investment property:

(a) land held for long-term capital

(b) land held for a currently

under a finance lease) and leased out under one or more

(d) a building that is vacant but is held to be leased out under

one or more operating leases.

(e) property that is being constructed or developed for future

use as investment property.

(a) it is probable that the future

(b) the cost of the

❑An investment property shall be at its cost.

▪ Transaction costs shall be included in the initial

• (a) its purchase price and;

• (b) Directly attributable expenditure for

Fair value model

An entity shall disclose:

(a) whether it applies the fair value model or the

(b) the amounts recognized in profit or loss

(d) transfers to and from investment property

(e) the depreciation methods used

(f) the useful lives or the depreciation rates used

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