Investment in property

• Investment property


  Property (land or a building or part of a building or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both
• Owner-occupied property


  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
• Classification of property as investment property or owner-occupied property

  • Property held under an operating lease can be classified as investment property if it meets the definition and the lessee uses the fair value model
  • Investment property is distinguished from owner-occupied property as it generates cash flows largely independently of other assets
  • If portions of a property can be sold or leased separately, they are accounted for separately
  • If portions cannot be sold separately, the property is investment property only if an insignificant portion is held for own use
  • Provision of ancillary services to occupants - if insignificant, the property is treated as investment property
• Inter-company rentals


  • Property leased to, and occupied by, its parent or subsidiary does not qualify as investment property in consolidated financial statements
• Measurement at initial recognition

  1. Investment property shall be measured initially at its cost, including transaction costs

  2. Property interest held under a finance lease shall be recognised at the lower of fair value and present value of minimum lease payments
• Measurement after recognition


  1. Entity may choose fair value model or cost model for all investment property

  2. Transfers to/from investment property are made when there is a change in use
• Transfers


  Commencement of owner-occupation, development with a view to sale, end of owner-occupation, commencement of operating lease to another party
• Fair value model


  • After initial recognition, all investment property shall be measured at fair value
  • Gain or loss from fair value change is recognised in profit or loss
• Cost model


  • After initial recognition, investment property shall be measured in accordance with IAS 16 requirements
  • Investment property held for sale shall be measured in accordance with IFRS 5
• Transfers between models


  1. For transfer from inventories to investment property at fair value, any difference between fair value and previous carrying amount is recognised in profit or loss

  2. For transfer from investment property at fair value to owner-occupied or inventories, the deemed cost is the fair value at date of change in use
• Disposals


  1. Investment property shall be derecognised on disposal or permanent withdrawal from use

  2. Gains or losses on disposal are recognised in profit or loss

  3. Compensation from third parties for impaired, lost or given up investment property is recognised in profit or loss
• Disclosure requirements - Cost model and Fair value model

  • Whether fair value or cost model is applied
  • Criteria used to distinguish investment property from owner-occupied and held-for-sale property
  • Restrictions on realisability of investment property or remittance of income and proceeds
  • Contractual obligations for purchase, construction, development, repairs, maintenance or enhancements
• Disclosure requirements - Cost model

  • Depreciation methods and useful lives used
  • Gross carrying amount, accumulated depreciation and reconciliation of carrying amount
  • Fair value of investment property (if not reliably measurable, description, explanation and estimate range)
• Disclosure requirements - Fair value model


  • Reconciliation of carrying amount showing additions, disposals, fair value gains/losses, exchange differences, transfers
  • Reconciliation of valuation adjustments
  • Extent to which fair value is based on independent valuation