MFRS 140

INVESTMENT PROPERTY
 Definition

 MFRS 140 defines Investment Property (Para 5): property (land or

a building / both) held to earn rentals or capital appreciation or both,
rather than use in the business or for sale in the ordinary course of
business.

 Includes:

 Property held by the owner

 Property held by the lessee under a Finance Lease

Definition (cont.)
Examples of Investment Properties
 Land held for long-term capital appreciation rather than for short-
term sales in the ordinary course of business;
 Land held for undetermined future use;
 A building owned (or held under finance lease) and leased out under
operating lease;
 A building that is vacant but is held to be leased out under operating
lease; and
 Property being constructed or developed for future use as
investment property.
MFRS 140-INVESTMENT PROPERTY

To prescribe the accounting treatment and

Objective
disclosure for

IP

Property (land, building (or its part) or both that held:

X Production or supply of
√ To earn rental or goods/ services
√ For capital appreciation or X Administrative purposes
√ both X Sale in ordinary course of
business
Application of property and applicable on the accounting standards.
 Dual Purpose

MFRS 140 (Para 10):

If the portion could be sold separately, an entity should account for the
portion as ‘investment property’ and as ‘PPE’ separately;
If the portions could not be sold separately, the property qualifies as
investment property only if an insignificant portion of the property is held
for use in business.
Example dual Purpose
Ancillary Services
 Ancillary Services

 If an entity provides ancillary services to the occupants of a

property.
 Insignificant services:
 When the owner of an office building provides security and
maintenance services to the lessees of their
building （ Investment Property ）
 Significant Services:
 The service provided to the guess by an entity who ones and
manages a hotel. （ Owner-occupied property ）
Example
 RECOGNITION
RECOGNITION

 Future economic benefit

 Any investment that flow Cost realisably measurable
to the entity
Recognition

 Investment property should be recognised as an asset only when:

 it is probable that future economic benefits associated with the
investment property will flow to the entity; and
 the cost of the investment property can be measured reliably.
 Day-to-day maintenance costs are not recognised.
 Subsequent costs for replacement of parts of the property are
recognised if the expenditure meets the recognition criteria. The
carrying amount of the parts replaced is derecognised.
INITIAL MESURMENT

COST Purchase Direct attributable

price cost

X start up cost X Operating losses X Abnormal waste

If deferred
Measure at cash and payment need
equivalent to discounted
value
Initial Measurement

 All investment properties are initially measured at cost.

 Transaction costs should be included in the initial measurement.

 The cost of a purchased investment property comprises the

purchase price and any directly attributable expenditure e.g.
professional fees for legal services, property transfer taxes and other
transaction costs.

 Start-up costs, operating losses and abnormal amounts of wasted

material, and labour costs are not included.

 If payment for an investment property is deferred, its cost is the cash

price equivalent. The difference between this amount and the total.
payments is recognised as interest expense over the period of credit.
Exchange Transaction
 When an investment property is acquired in exchange for non-monetary
assets, in whole or in part, the commercial substance should be considered.

 The cost of such an investment property is measured at fair value unless:

a. the exchange transaction lacks commercial substance; or
b. the fair value of neither the asset received nor the asset given up is
reliably measurable.
 If (despite lack of market transactions) the entity is able to determine reliably
the fair value of either the asset received or the asset given up, then the fair
value of the asset given up is taken as cost of the asset received, unless the
fair value of the asset received is more clearly evident.
 If the fair value of the asset acquired is not measured at fair value then its
cost is measured at the carrying amount of the asset given up.
SUBSEQUENT MEASUREMENT

FAIR VALUE COST MODEL

Not same like

revaluation model
Cost
under MFRS 16

Acc depreciation

Acc impairment
loss
Measurement Subsequent to
Initial Recognition

After the initial measurement, an entity may:

1. choose the fair value model or cost model for all investment
property backing liabilities that pay a return linked directly to
the fair value of, or returns from, specified assets including
that investment property; and

2. choose fair value model or the cost model for all other
investment properties, regardless of the choice made in (a)
above.
COST MODEL

 In accordance – MFRS 116

 If classified as held for sale – MFRS 5 Non- current

asset held for sale and discounted operations.
Cost Model
 After the initial recognition, an entity that chooses the cost
model should measure all of its investment properties in
accordance to MFRS 116 Property, Plant and Equipment, at
cost less any accumulated depreciation and any accumulated
impairment losses.

 Those that meet the criteria to be classified as ‘held for sale’

should be accounted for under MFRS 5 Non-current Assets
Held for Sale and Discontinued Operations.

 The policy chosen, i.e. cost model or fair value model should
be consistently applied to all investment properties. If a
change results in a more appropriate presentation, a change
from one model to the other is allowed.
FAIR VALUE MODEL

√ Investment property is re-measured to fair value (MFRS 13)

√ Gain/ Loss from re-measurement = profit/loss

Loss = Dr loss from fair value changes
Profit= credit investment property

X depreciation charged
Fair value model
 MFRS 140 defines fair value as ‘the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm’s length
transaction.’
 The fair value of investment property should reflect the actual market state
and circumstances as of the reporting date, not as of either a part or future
date. There should be no deduction for transaction costs.
 An entity that chooses the fair value model is required to measure all of its
investment properties at fair value.
 Fair value model is applicable to an operating lease classified as an
investment property by the lessee.
 If the entity has adopted the fair value model, it is required to apply the fair
value model until the disposal of the asset or until there is a change in use.
 A gain or loss arising from a change in the fair value of investment property
should be recognised in the income statement for the period in which it
arises.
 The asset is not depreciated.
 Fair value is not recoverable amount.
Transfers
MFRS 140 allows transfers to or from investment property only
when there is a change in use evidenced by the following:

For transfer from investment property to owner-occupied

property on commencement of owner-occupation;
For transfer from investment property to inventories on
commencement of development with view to sale;
For transfer from owner occupied property to investment
property at the end of the owner occupation; or
Transfer from inventories to investment property at the
commencement of an operating lease.
 DERECOGNITION

When
permanently
On disposal withdrawn from
use

GAIN OR LOSS

= Net disposal proceeds- carrying amount

Gain or loss is included in profit or loss

Disposals
 An investment property should be derecognised or removed
from the SOFP on disposal or when the investment property
is permanently withdrawn from use and no future economic
benefits are expected from its disposal.
 Any gain or loss arising from the disposal or retirement
should be determined as the difference between the net
disposal proceeds and the carrying amount of the asset and
should be recognised as income or expense in the income
statement.
Disclosures
 The model applied
 When classification is difficult, the criteria it uses to distinguish investment
property from owner-occupied property and from property ‘held for sale
 Methods and significant assumptions applied in determining the fair value
of investment property
 Extent to which the fair value of investment property is based on a
valuation by an independent valuer. If there has been no such valuation,
that fact shall be disclosed.
 The amounts recognised in income statement: rental income, direct
operating expenses arising from investment property
 The existence and amounts of restrictions on the realisability of
investment property or the remittance of income and proceeds of disposal;
and
 Contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance or enhancement.
 Additional Disclosure
for Fair Value Model
 Additions resulting from acquisitions and those resulting from
subsequent expenditure recognised in the carrying amount of an
asset
 Additions resulting from acquisitions through business combinations;
 Assets classified as held for sale or included in a disposal group
classified as held for sale in accordance with MFRS 5 and other
disposals
 Net gains or losses from fair value adjustments
 Net exchange of differences arising on the translation of the financial
statements into a different presentation currency and a translation of a
foreign operation into the presentation currency of the reporting entity
 Transfers to and from inventories and owner-occupied property
 Other changes.
 Additional Disclosure
for Fair Value Model (c‘td)
• When a valuation obtained is adjusted significantly for the purpose of the
financial statements, the entity shall disclose a reconciliation between the
valuation obtained and the adjusted valuation
• When an entity measures investment property using the cost model because of
the lack of a reliable fair value on a continuing basis, the entity should disclose
amounts relating to that investment property separately from amounts relating to
other investment properties in the above disclosure.
• An entity should disclose:
a. a description of the investment property;
b. an explanation of why fair value cannot be reliably measured;
c. the range of estimates within which fair value is highly likely to lie; and
d. on disposal of investment property not carried at fair value:
 the fact that the entity has disposed of investment property not carried
at fair value;
 the carrying amount of that investment property at the time of sale; and
 the amount of gain or loss recognised.
 Additional Disclosure
for Cost Model
 Depreciation methods used
 Useful lives or depreciation rates used
 Gross carrying amount, accumulated depreciation and accumulated
impairment losses at the beginning and end of the period;
 A reconciliation of the carrying amount of the investment property at the
beginning and end of the period showing:
 Additions from acquisitions and those resulting from capitalised
subsequent expenditure;
 Additions from acquisitions through business combinations;
 Disposals;
 Depreciation;
 Amount of impairment losses recognised and the amount of impairment
losses reversed, during the period under MFRS 136;
 Net exchange differences arising on the translation of the financial
statements of a foreign entity;
 Transfers to and from inventories and owner-occupied property; and
 Other movements
Additional Disclosure
for Cost Model (c’td)
 Fair value of investment property.
 In the exception when an entity cannot determine the fair value of the
investment property reliably, the following should be disclosed:
 A description of the investment property;
 An explanation of why fair value cannot be determined reliably; and
 The range of estimates within which fair value is highly likely to lie.