IAS 40 INVESTMENT PROPERTY

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, but not 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

PROPERTY BEING CONSTRUCTED FOR HANDING TO THIRD PARTY AS PER ifrs 15 ALSO NOT INCLUDED
AS INVESTMENT PROPERTY.

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

PROPERTY UNDER FINANCE LEASE ifrs 16 LEASES

4.1. Initial measurement

Investment properties should initially be measured at cost plus directly attributable costs.(same as
IAS 16 PPE)

4.2. Subsequent measurement

Fair value model Cost model

The investment properties are revalued to The investment properties are held using

fair value at each reporting date benchmark method in IAS 16 (cost)

The properties are depreciated like any

Gains or losses on revaluation are
recognized directly through profit or loss other asset

The properties are not depreciated

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

TRANSFERS
PPE to IP
FROM REVALUATION MODEL OF PPE TO IP: The asset must first be revalued per IAS 16 (creating a
revaluation surplus in equity) and then transferred into investment property at fair value.

FROM COST MODEL OF PPE TO IP: The asset is transferred into investment properties at the current
carrying amount and continues to be depreciated.
IP TO PPE
FROM FAIR VALUE OF IP TO PPE: Revalue the property first per IAS 40 (taking the gain or loss to the
statement of profit or loss) and then transfer to property, plant and equipment at fair value.

FROM COST MODEL OF IP TO PPE: The asset is transferred into property, plant and equipment at the
current carrying amount and continues to be depreciated.

SHORTCUT

๏ IP to owner occupied (IAS 16) – Fair value at date of change (gain or loss transferred to SPL )

๏ IP to inventory (IAS 2) – Fair value at date of transfer (gain or loss transferred to SPL )

๏ Owner occupied (IAS 16) to IP – Revalue under IAS 16 and then treat as IP( Gain to OCI and loss to
OCI and remaining to SPL ie same as IAS 16)

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

IN DETAILS https://www.iasplus.com/en/standards/ias/ias40