Investment Property
PAS 40
NATURE
• PAS 40 prescribes the accounting and disclosure requirements for
investments property.
• Investment Property - is land and/or building held to earn rentals or for
capital appreciation or both.
• Investment property includes only land and building. It does not include
any other type of asset.
• PAS 40 requires an entity to determine the fair value of the investment
property, regardless of the accounting policy used.
• Under the fair value model, fair value is used for measurement
purposes while under the cost model, fair value is used for disclosure
purposes.
• PAS 40 encourages, but does not require, the use of an independent
valuer in determining the fair value of an investment property.
RECOGNITION
• An investment property is recognized when it meets the
definition of an investment property as well as the asset
recognition criteria of “probable future economic
benefits” and “reliable measurement of cost”
DERECOGNITION
• An investment property is derecognized when it is
disposed of or when no future economic benefits are
expected from it.
• On derecognition, the difference between the carrying
amount and the net disposal proceeds, if any, is
recognized as gain or loss in profit or loss (unless PFRS
16 leases requires otherwise on a sale and leaseback)
MEASUREMENT
• Initial Measurement
An investment property is initially measured at cost.
The measurement of cost depends on the mode of acquisition.
Mode 1: Acquisition by purchase – the cost of a purchased investment
property comprises the purchase price and any directly attributable
costs incurred in bringing the asset to its intended condition.
Mode 2: Exchanges of assets – the measurement of an investment
property acquired in exchange for another non-monetary asset
depends on whether the exchange transaction has commercial
substance or not.
• Subsequent measurement
After initial recognition, an entity chooses either the cost
model or the fair value model as its accounting policy and
applies that policy to all of its investment property.
Only one model shall be used. Using both models selectively
for items of investment property is prohibited.
TRANSACTION
A. Land held for long-term capital appreciation rather
than for short-term in the ordinary course of business.
B. Land held for a currently undetermined future use.
C. A building owned by the entity (or a right-of-use asset
relating to a building held by the entity) and leased
out under one or more operating leases.
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
PRESENTATION
• A property that is leased by a member of a group to
another member (parent or subsidiary) does not qualify
as investment property in the consolidated financial
statements because, from the group’s perspective, the
property is owner-occupied.
• However, the property is classified as investment
property in the lessor/owner’s individual financial
statements.
DISCLOSURE
• General disclosure:
a. Whether the entity uses the fair value model or the cost model.
b. When classification is difficult, the criteria used to distinguish
investment property from PPE and inventory.
c. The extent to which the fair value of investment property is based on
a valuation by an independent valuer. If an independent valuation is
not obtained, that fact is disclosed.
d. The amounts recognized in profit or loss for rental income and
related expenses.
e. The existence and amounts of restrictions on investment property.
f. Contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance or enhancements
• Additional disclosures under the fair value model:
a. Reconciliation showing increases and decreases in investment
property.
b. When a valuation obtained for investment property is
adjusted to avoid double counting of assets or liabilities that
are recognized as separate assets and liabilities, the entity
discloses a reconciliation between the valuation obtained and
the adjusted valuation.
c. Disclosure of any investment property whose fair value on
initial recognition cannot be reliably measured and hence
measured under the cost model using the exception allowed
under PAS 40.
• Additional disclosure under the Cost model:
a. The depreciation methods used, the useful lives, and
the depreciation rates used;
b. Reconciliation showing increases and decreases in
investment property and related accumulated
depreciation and accumulated impairment loss
THANK
YOU
