IAS 40: Investment Property

🥕 IAS 40: Investment Property - applies to accounting for property held to earn rentals or for capital appreciation.

Measurement

Initially measured at cost (purchase price + DACS)

prof fee, transfer taxes, installation, etc.

Subsequent Measurement: Cost Model or fair value method

Fair value method: changes in fair value recognized in profit or loss

If the problem is silent: Straight line method

Examples of Investment Property Properties outside the scope of IAS 40

land held for long-term capital appreciation property held for use in the production or supply of goods
or services (IAS 16)
land held for a currently undetermined future use
property held for administrative purposes
building leased out or to be leased out under an operating
lease property held for sale in the ordinary course of the business
(applies to IAS 2 Inventories)
property that is being constructed or developed for future
use as an investment property property constructed on behalf of third parties (IAS 11
Construction contracts)
Property held under an operating lease
Owner-occupied property (IAS 16 PPE)
definition of investment property is met
property awaiting disposal property leased to another entity
the operating lease is accounted for as if it were a
under a finance lease
finance lease in accordance with IAS 17 Leases

lessee uses the fair value model

Building held under finance lease and leased out under

operating lease.

IAS 40 vs. IAS 16

IAS 40 IAS 16

Value assets rented and/or held for capital appreciation Value non-current assets used for business activity

Does not depreciate but is subsequently measured using a cost model or

Depreciation - cost and market value models
fair value method

Other classification
Partial owner use

if the owner uses the property for its own use and a part of it is used to earn rentals or for capital appreciation, then the part used
for rentals is accounted for separately.

Ancillary service

Ancillary services are similar to security or maintenance services.

When the entity provides ancillary services to the occupants of the property held by the entity.

Relatively Insignificant - building owner provides security and maintenance services to the lessees - treated the property as an
investment property.

ex: condominium - yung mag ari ng condo and mag maintenance

IAS 40: Investment Property 1

 More Significant - owner-managed hotel - property is classified as owner-occupied

yung owner ng building is mag maintenance

IAS 40-13

Intracompany Rentals

🥕
Property rented to a parent, subsidiary, or fellow
subsidiary is NOT INVESTMENT PROPERTY.
Reason: the property is owner-occupied from the
perspective of the group in the consolidated financial
statements
Owner-occupied property- is property held (by the
owner or by the lessee under a finance lease) for use
in the production or supply of goods or services or
for administrative purposes.

if separated fs = investment property

if consolidated fs - as if the building is used for admin.

purposes, owner-occupied property

Recognition

Investment property is recognized as an asset when it is probable that the future economic benefits will flow and the cost of the
property can be reliably measured.

Initial Measurement Subsequent Measurement

Cost + transaction cost fair value model

Should not include: start-up cost, abnormal waste, or initial cost model
operating losses incurred
Change is permitted if it is appropriated.

Fair value model

Measured at fair value

Changes in fair value must be included in net profit or loss

It does not depreciate

CA - FV

IF

Investment property cannot be readily determined its fair value during construction, it will be measured under construction at cost
until its fair value becomes reliable

Investment property cannot readily determine its fair value on a continuing basis, the entity shall measure the cost model in IAS
16. The residual value shall be assumed to be zero. The entity shall apply IAS 16 until the disposal of the investment property.

n
Cost model

Revaluation model (in PPE)

CA (CA -Depreciation) - FV

It is accounted with the cost model like in IAS 16, less accumulated depreciation and less accumulated impairment loss

Revaluation surplus - goes to OCI

Transfer to or from investment property classification

can only be done when there is a change in use

IAS 40: Investment Property 2

 Rules to apply

investment property at fair value to owner-occupied or inventories - the fair value at the change is the cost of the property
under the new classification

owner-occupied to investment property at fair value - IAS 16 is applied to the date of reclassification. The difference is in the
carrying amount, and the fair value is dealt with as a revaluation

inventories to investment property at fair value - the difference between the fair value and the previous carrying amount is
recognized as profit or loss

completed construction of investment property that will be carried at fair value - the difference between the fair value and
the previous carrying amount is recognized as profit or loss

Disposal

an investment property should be unrecognized on disposal when there are no future economic benefits are expected from its
disposal or permanently withdrawn from use

Operating lease - not transfer of ownership

Financing lease - sale transaction, there is a transfer of ownership

IAS 40: Investment Property 3

 answer
b. 137k

IAS 40: Investment Property 4