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IPSAS 16_Investment Property

IPSAS 16_Investment Property

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International Public Sector
Accounting Standards Board
International Public Sector
Accounting Standards Board

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Published by: ritunath on Aug 12, 2013
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IPSAS 16- Investment Property

Madrid Union Building, Rue de la Prulay 40, Meyrin Fair Value Opening balance Fair value gains/(losses) on valuation Closing balance December 31, December 31, 2012 2011 (in thousands of Swiss francs) 4,316 469 4,785 4,316 4,316

The Organization acquired in 1974 the Madrid Union Building, an investment property in Meyrin, Canton of Geneva, Switzerland. The building had first been brought into service in 1964. The property is held at fair value based on a valuation at December 31, 2012 carried out by an independent expert holding recognized and relevant professional qualifications with recent experience in property valuation in the Canton of Geneva. Fair value was determined on an investment based valuation, whereby the future income stream from the property is capitalized at an appropriate investment yield. The yield was selected by reference to the perceived quality and duration of the income and the potential for further rental growth and was cross-referenced by the evidence provided by comparable sales. The valuation as at December 31, 2012 resulted in an increase in the fair value of the building of 0.5 million Swiss francs. This increase is recognized in 2012 as investment revenue in the statement of financial performance. The leasing of apartments, parking and other facilities in the Madrid Union Building is managed by a leasing agent responsible for collecting all rental income and paying for all expenditures incurred in the operation of the building. Leases are generally for periods of two years and are based on the form of lease approved by the Canton of Geneva. All leases are non-cancellable during the period of the lease. The managing agent receives 3.9 per cent of the gross rental income as compensation for its services. The value of non-cancellable leases at December 31, 2012 is as follows:
Madrid Union Building, Rue de la Prulay 40, Meyrin Non-cancellable leases Not later than one year Later than one year and not later than five years Later than five years Total non-cancellable operating leases December 31, December 31, 2012 2011 (in thousands of Swiss francs) 312 195 507 319 342 661

The income from rentals of 364 thousand Swiss francs and the operating expenditures of the building of 221 thousand Swiss francs are not recorded separately in WIPO’s accounts. Only the net amount of income received from the managing agent totaling 143,860 Swiss francs is recorded as rental income in the Statement of Financial Performance. The expenses netted from income by the managing agent do not include depreciation of the building. At the reporting date there are no contractual obligations to purchase, construct or

maintenance or enhancement of the existing property.develop investment property nor for the repairs. Fair value Model and Cost Model (IPSAS 16. No 1. Check the disclosures Under IPSAS 13. 2. Direct operating expenses (including repairs and maintenance) arising from Test Result Yes No KD Ref Remarks 2 . and in what circumstances. Rental revenue from investment property ii. Check whether this requirement is fulfilled in the disclosure. whether.86) a) Whether WIPO applied fair value model or cost model b) If applied fair value model. property interests held under operating leases are classified and accounted for as a investment property c) The methods and significant assumptions applied in determining the fair value of the investment property d) A statement of whether fair value is supported by market evidence or is more heavily based on other factors (which WIPO discloses) because of the nature of the property and lack of comparable market data e) The extent to which the fair value investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognized or relevant professional qualification and who has recent experience in the location and category of the investment property being valued. Under IPSAS 13. an owner of an investment property provides lessor’s disclosures about leases into which it has entered. f) The amounts recognized in surplus or deficit for i. an entity that holds an investment property under a finance or a or an operating lease provides lessee’s disclosures for finance leases and lessor’s disclosures for any operating leases into which it has entered. Tests conducted Sr.

useful lives. iii. maintenance or enhancements. maintenance or enhancements Fair Value Model (IPSAS 16. c) Any restrictions on the ability to realize rental revenue or proceeds of disposal of an investment property should be disclosed along with any contractual obligations to purchase. construct or develop investment property or repairs.4. 5.1 of IPSAS Manual) The value of investment properties will be carried at fair value as determined by an independent appraiser. b) If fair value is used. Accounting Policies (Para 11.3. 3 . construct or develop investment property or for repairs. movement tables showing changes in cost and accumulated depreciation and the amounts included in the statement of financial performance for rental revenue and direct operating expenses including repairs utilized to generate revenue should be disclosed. Improvements costing in excess of CHF 4.3. does it also reconcile the carrying amount of investment property at the beginning and at the end of the reporting period showing the following: b) Additions. the methods of calculating fair value and whether the valuation was performed by an independent valuer should also be disclosed.87) a) If WIPO had applied fair value model. disclosing separately those additions from acquisitions and those resulting from subsequent expenditure recognized in the carrying amount as an asset c) Disposals d) Net gains or losses from fair value adjustments Para 11. Direct operating expenses (including repairs and maintenance) arising from investment property that do generate general rental revenue during the period g) The existence and amounts of restrictions on the realisability of investment property or the remittance of revenue and proceeds of disposal h) The contractual obligations to purchase. investment property that generated rental revenue during the period. along with a separate disclosure for expenses and repairs not related to the generation of revenue.1 of WIPO IPSAS Manual a) Depreciation methods.

Accounting procedure: Investment property revaluation: (para 11.50’000 will be capitalized if they result in an increase in the fair value of the property. i. ii. or crediting the investment property fixed asset account 23500 and debiting the statement of financial performance account 76410 Building revaluation expense with the amount of a decrease in valuation 4 .5.1 of IPSAS Manual) When an independent valuation of investment property owned by WIPO is completed an entry is recorded in the adjustment ledger debiting the investment property fixed asset account 23500 using the appropriate analysis code for the Meyrin Building and crediting the statement of financial performance account 66400 Building revaluation gain with the amount of an increase in valuation. Check whether there were any improvements in excess of CHF 50.000 and they were capitalized 6. Check whether this was indicated in the Accounting Policies.

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