This document summarizes Investment property (Ias40). It is summarized in a very user friendly and understandable way. I believe it will be very helpful in completing your degree as a chartered accountant.
Investment property
4.1. IAS 40
▪ INVESTMENT PROPERTY (IP): Land or buildings or part thereof held by owner or right of use asset of tenant, to earn rental
income or capital appreciation rather than for:
Use in production, provision of services, admin purposes; or
Sales in the ordinary course of business.
What is NOT investment property? What is investment property?
▪ Owner-occupied property (IAS 16) ▪ Land held for LT capital appreciation rather than ST sale
▪ Leased property under finance lease (IFRS 16) ▪ Land held for undetermined future use
▪ Property held for sale (IAS 2) ▪ Building owned and leased out under operating lease
▪ Vacant building but wants to rent out under operating lease
▪ Property under construction / development for use as IP
▪ Mixed / joint use: Separate classification as:
Parts can be sold or leased separately
Cannot sell separately
Owner occupied is not significant = then investment property
If significant then IAS 16
▪ Measure EVERY year after FV! No depreciation; No impairment test (on FV model)
FV can always be measured reliably
▪ Investment property not under construction:
Before FV then continue with FV forever
Initial recognition - FV does not reliably measure then this particular property forever Cost model (even if other
investment property is fair value model)
▪ FV not available now:
Measure at cost until FV can be measured or construction is completed.
Becomes available during construction→ forever FV
Construction completed determines whether FV can measure sustainably.
If can = measure against FV
If not possible = measure against cost MODEL (depreciation and impairment)
▪ Summary:
Must use FV for other investment property unless initially determined FV cannot be measured reliably
Must use cost model as initially determined FV cannot be measured sustainably reliably
Deferred tax
▪ It is ASSUMED that investment property will be recovered through SALE EXCEPT (rebuttable) if:
Investment property is depreciable asset AND
It’s held within business model with intention of utilising the FEB over time from using property, rather than sell it
▪ FV adjustments recognised in P/L
4.2. Journal entries
Dr / Cr
Dr Depreciation (p/l)
1 Cr Accumulated depreciation (SFP)
Recognition of depreciation for the year
2 Dr Building: cost (SFP) = FV – CA
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller anashpatel. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.18. You're not tied to anything after your purchase.
