Chapter 9 – INVESTMENT PROPERTY
Property held to provide a social service
Introduction
Investment Property
- land or building held for rentals or capital
appreciation
- not held for use in the production or supply
of goods and services, for administrative
purposes, or sale in the ordinary course of
business
ARE Investment Property:
a. Land held for long-term capital appreciation
b. Land held for a currently undetermined
future use
c. Building owned or leased (finance lease) by
entity leased out under 1 or more operating
leases on a commercial basis
d. Vacant building held to be leased out under 1
or more operating leases on a commercial
basis to external parties
e. Property being constructed or developed for
future use as IP
f. Property = significant portion held to earn
rentals for capital appreciation + insignificant
portion held for use in the production or
supply of goods or services or for
administrative purposes
NOT Investment Property:
a. Biological assets related to agricultural
activity
b. Mineral rights and mineral reserves such as
oil, natural gas, and similar non-regenerative
resources
c. Property held for sale in the ordinary course
of operations or in the process of
construction or development for such sale
d. Property being constructed/developed for
third parties
e. Owner-occupied property, including
a. Held for future use as owner-occupied
property
b. Held for future development and
subsequent use as owner-occupied
property
c. Property occupied by employees
d. Owner-occupied property awaiting
disposal
f. Property leased to another entity under a
finance lease
g.
which also generates cash inflow
h. Property held for strategic purposes
i. Property held for use in the production or
supply of goods or services or for
administrative purposes
Initial Measurement
- Initially measured at COST depending on the
mode of acquisition
-
NOT included in Cost:
a. Start-up cost, unless necessary to bring the
property to its intended condition for it to be
capable of operating in the manner intended
by management
b. Operating losses incurred before IP achieves
the planned level of occupancy
c. Abnormal amounts of wasted materials, labor,
or other resources incurred in constructing or
developing the property
Modes of Acquisition
1. Cash purchase
- Purchase price + direct costs necessary to
bring the asset to its intended condition
Dr: Investment Property, Land
Cr: Cash-Modified Disbursement System
(MDS), Regular
To recognize the purchase of investment
property
Note: of equal amounts
2. Installment purchase
- Cash price equivalent
- Interest expense = total payments - cash
price equivalent … (over the period of the
credit)
3. Non-exchange transaction
- Fair value at the acquisition date
Dr: Investment Property, Land
Cr: Income from Grants and Donations in
Kind
To recognize receipt of donated land
Note: of equal amounts
4. Self-construction
- Costs of direct materials + labor +
construction overhead
- Wasted materials, labors, or other
resources are recognized as expense
 - Initially recorded in “Construction in
Progress,” reclassified to “Investment
Property” upon completion
Subsequent Measurement
- Cost model
- Costs – (accumulated depreciation +
accumulated impairment losses)
Impairment
Transfers to/from IP
- Only when there is change in use
- Accounted for at cost = no gain or loss unless
impaired [impairment loss]
Evidences to change in use:
a. Commencement of owner-occupation = IP
transfer to owner-occupied property
Dr: Buildings
Dr: Accumulated Depreciation – I.P.,
Buildings
Dr: Accumulated Impairment L. – I.P.,
Buildings
Cr: Investment Property, Buildings
Note: of equal amounts, Dr and Cr balanced
b. End of owner-occupation = owner occupied
property transfer to IP
Dr: Investment Property, Buildings
Dr: Accumulated Depreciation – Buildings
Indications of Impairment
Dr: Accumulated Impairment L. -
1) External sources of information
Buildings
Cr: Buildings
Note: of equal amounts, Dr and Cr balanced
c. Commencement of an operating lease
(commercial basis) to another party =
inventories transfer to IP
Dr: Investment Property, Buildings
Cr: Merchandise Inventory
Note: of equal amounts
2) Internal sources of information
d. Commencement of development with a view
to sale = IP transfer to inventories
Dr: Merchandise Inventory
Dr: Accumulated Depreciation – Buildings
Dr: Accumulated Impairment L. -
Buildings
Cr: Investment Property, Buildings
Note: of equal amounts, Dr and Cr balanced
Derecognition
- Disposed
- Permanently withdrawn from use
- No future economic benefits or service
potential is expected from its disposal
- Disposal proceeds – carrying amount =
gain(loss)
- Carrying amount – recoverable amount =
impairment loss
o Recoverable amount – higher of
assets fair value less costs to sell vs
value in use
o Value in use – present value of the
estimated future cash flows expected
to be derived from the continuing use
of an asset and from its disposal at the
end of its useful life
- Asses for indications of impairment at each
reporting date
- Indication exists: determine the recoverable
amount
o When not possible, recoverable
amount of the cash generating unit
where the individual asset belongs
- After impairment, depreciation charges will
be based on its recoverable amount
a) Significant decline in the asset’s market value
b) Significant changes in technological, market,
economic, or legal environment that
adversely affect the recoverable amount of an
asset
c) Increase in market interest rates that
adversely affect the discount rate used in
calculating an asset’s value in use, and
consequently, its recoverable amount
a) Obsolescence or physical damage
b) Significant changes in the expected use of the
asset that adversely affect its recoverable
amount
c) Cessation of the construction of the asset
before it is completed
d) Indications that the economic performance of
an asset is, or will be, worse than expected
Cash Generating Unit - Insurance claim is approved and becomes
- Smallest identifiable group of assets held with receivable
the primary objective of generating a
Dr: Due from GOCC’s
commercial return that generates cash
inflows from continuing use that are largely Cr: Other Service Income
independent of the cash inflows from other
assets or groups of assets
- In CGU: carrying amount – recoverable
amount = impairment loss
o Allocated pro rata basis based on
their carrying amounts
o The carrying amount of the individual
assets shall not be reduced below the
highest of:
 Fair value less costs to sell (if
determinable)
 Value in use (if determinable)
 Zero

Reversal of Impairment
- Assess whether impairment loss is
recognized in prior periods for an asset may
no longer exist or may have decreased
- Indication exists: estimate the recoverable
amount of that asset
- Assessment: consider the exact opposites of
the indications of impairment
o Significant increase in the assets
market value
o Favorably affect the recoverable
amount of an asset
- Reversal of impairment shall not result to a
carrying amount in excess of the asset’s
carrying amount when no impairment loss
was recognized in prior periods (excess is
ignored)
Dr: Accum. Impairment Losses –
Investment Property, Buildings
Cr: Reversal of Impairment Losses
To recognize reversal of impairment loss

Compensation from third parties

- For an IP that was impaired, lost, or given up
shall be recognized in surplus or deficit when
the compensation becomes receivable.
Example: Insurance
Dr: Loss of Assets
Dr: Accum. Dep. – I.P., Bldgs.
Cr: Investment Property