IAS-40 Investment Property

Land & Building held for Capital Appreciations & for Rental Purpose to Others or for Both

, Other than;
- Property held for use (Owner Occupied Property) [IAS-16] PPE
- Property acquired for resale purpose in ordinary cause of business inventory [IAS-2]
1) Recognition: - Definition of Investment Property should be met
- Cost can be measured reliably
- Inflow of Economic benefits are Probable
2) Measurement:
Initial Measurement (at the time of recognition) Subsequent Measurement

At Cost: Cost Model Fair Value Model

(i) Purchase Price Cost xx Carrying Value=Fair Value
(ii) Directly Attributable Expense - Acc.Dep (xx) No Depreciation
- Acc.Imp.Loss (xx) No Impairment Loss
F.V Gain/Loss P/L

3) De-Recognition: When Substantial Risk & Rewards of Investment Property no longer belongs to
entity,
(Disposal, Completely Destroyed)
Profit & Loss = Disposal Proceed – Carrying Value
-Compensation from third parties charged to profit &
loss when becomes receivable

4) Transfers: When there is a change in actual use of asset

e.g# From IAS-16 IAS-40, IAS-40 IAS-16 or IAS-2 IAS-16 = Gain-OCI, Loss-P/L
DR New Standard (By Name) xx (Transfer Value) IAS-40 = Gain/Loss - P/L
CR Old Standard xx (Carrying Value) IAS-2 = Gain/Loss - P/L

Transfer Value = Depends on measurement model of IAS-40

Cost Model Fair Value Model
Transfer Value = Carrying Value Transfer Value = Fair Value
Any Gain/Loss will be treated as per old standard

e.g# Use Let Out Sol; Cost Model: Fair Value Model:
Carrying Value = 200 Dr Investment Prop 200 Dr Investment Prop 230
Fair Value = 230 Cr PPE 200 Cr PPE 200
Cr Gain (OCI) 30

e.g# Let Out Use Sol; Cost Model: Fair Value Model:

Zubair Saleem AAFR notes IAS-40 1

 Carrying Value = 390 Dr PPE 390 Dr PPE 420
Fair Value = 420 Cr Investment Prop 390 Cr Investment Prop 390
Cr Gain (P/L) 30

5)Classification:
- Property with undetermined use (IAS-40) [Ultimately Capital Appreciation]
- Property let out to own employees (IAS-16) [Basic purpose is Use]
- Property let out with ancillary services (IAS-16 or 40) > Significant Services : IAS-16
> Insignificant Services : IAS-40

- Property with multiple uses/purposes : 1st = Office - Own Use

2nd = Let Out - Let Out
3rd = Let Out - Let Out
Can be Sold Separately or Not?
Yes No (Significant Area)
1st = IAS-16, 2nd/3rd = IAS-40 Whole Building = IAS-40

-Investment property includes

a. Equipment such as lifts or air conditioning in an
investment property
b. Furniture in case of furnished rental property

- Property let out to own Subsidiary/Parent :

Accounts?
Consolidated A/c = IAS-16 (P-S)

Individual A/c = IAS-40 (P) (S)

Zubair Saleem AAFR notes IAS-40 2

Zubair Saleem AAFR notes IAS-40 3