Government Accounting

&
Accounting for non-profit organizations

by: ZEUS VERNON B. MILLAN

 Chapter 9
Investment Property 

Learning Objectives
1. Define investment property and give
examples.
2. State the initial and subsequent
measurements of an investment property.
3. Account for the impairment of investment
property, and the reversal thereof.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 Investment Property
• Investment Property – is land and/or building held for
rentals or capital appreciation.
• Examples:
a. Land held for long-term capital appreciation rather than
for short-term sale in the ordinary course of operations.
b. Land held for a currently undetermined future use.
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 on a commercial basis.
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.
GOVT ACCTG & ACCTG FOR NPOs by:
Z.B.Millan
 Investment Property
• The following are NOT considered investment property:
• Biological assets and Mineral rights and mineral reserves
• Property held for sale in the ordinary course of operations
• Property being constructed on behalf of third parties.
• Property held for future development and subsequent use as
owner-occupied property.
• Property occupied by employees.
• Owner-occupied property awaiting disposal.
• Property that is leased to another entity under a finance lease.
• Property held to provide a social service and which also generates
cash inflows.
• Property held for strategic purposes.
• Property held for use in the production or supply of goods or
services or for administrative purposes.
 Initial Measurement
• An investment property is initially measured at
cost. The measurement of cost depends on the
mode of acquisition.
• Modes of Acquisition
a. Cash purchase – purchase price plus direct costs
necessary in bringing the asset to its intended
condition.
b. Installment purchase – cash price equivalent
c. Non-exchange transaction – fair value at
acquisition date
d. Self-construction – direct materials, labor, and
construction overhead
GOVT ACCTG & ACCTG FOR NPOs by:
Z.B.Millan
 Subsequent Measurement
• Investment properties are subsequently measured
at cost less accumulated depreciation and
accumulated impairment losses (i.e., Cost Model).

• Note: The fair value model is not allowed for

government entities.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
Transfers To or From Investment Property
• Transfers to or from investment property shall be
made only when there is a change in use.
• A government entity accounts for transfers to or
from investment property at cost. Accordingly, no
gain or loss shall arise from the transfer, except
when the transferred asset is impaired.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 Derecognition
• An investment property is derecognized when it is
disposed or when it is permanently withdrawn
from use and no future economic benefits or
service potential is expected from its disposal.
• The difference between the net disposal proceeds
(if any) and the carrying amount is recognized as
gain or loss in surplus or deficit.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 Impairment
• An asset is impaired if its carrying amount exceeds
its recoverable amount. The excess represents
impairment loss which shall be recognized in
surplus or deficit.
• Recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use.
• Value in use is the 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.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 Reversal of Impairment
• The reversal of impairment shall not result to a
carrying amount in excess of the asset’s carrying
amount had no impairment loss been recognized
in prior periods.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
Compensation from third parties
• Compensation from third parties for an investment
property that was impaired, lost or given up shall
be recognized in surplus or deficit when the
compensation becomes receivable.

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 APPLICATION OF CONCEPTS
 

PROBLEM 9-3: FOR CLASSROOM DISCUSSION

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

GOVT ACCTG & ACCTG FOR NPOs by:

Z.B.Millan
 END

GOVT ACCTG & ACCTG FOR NPOs by: Z.B.Millan