Investment properties (IAS 40)

Investment property is property (land or a building – or part of a building – or both) held to earn rentals or for capital appreciation or both, rather than for:

๏ Use in the production or supply of goods and services or for administrative purposes (IAS 16); or

๏ Sale in the ordinary course of business (IAS 2); or

๏ Future use as an investment property (IAS 16 until completed)

Initial measurement

Investment properties should initially be measured at cost plus directly attributable costs.

Subsequent measurement

Fair value model

๏ The investment properties are revalued

to fair value at each reporting date

๏ Gains or losses on revaluation are

recognised directly through profit or loss

๏ The properties are not depreciated

Cost model

๏ The investment properties are held using

the benchmark method in IAS 16 (cost)

๏ The properties are depreciated like any other asset

Transfers into and out of investment property should only be made when supported by a change of use of the property.

๏ IP to owner occupied (IAS 16) – Fair value at date of change

๏ IP to inventory (IAS 2) – Fair value at date of transfer

๏ Owner occupied (IAS 16) to IP – Revalue under IAS 16 and then treat as IP

๏ Inventory (IAS 2) to IP – Fair value on change and gain/loss to profit or loss

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