MODULE ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS

CHAPTER 9 INVESTMENT PROPERTY

Learning Objectives

Define investment property and give

examples.

State the initial and subsequent

measurements of an investment property.

Account for the impairment of investment

property, and the reversal thereof.

Investment Property

 Investment Property – is land and/or building held for rentals or capital

appreciation.

 Examples:

a. Land held for long-term capital appreciation rather than for short-term sale in the
ordinary course of operations.

b. Land held for a currently undetermined future use.

c. A building owned by the entity (or held by the entity under a finance lease) and
leased out under one or more operating leases on a commercial basis.

d. A building that is vacant but is held to be leased out under one or more is
operating leases.
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e. Property that is being constructed or developed for future use as investment

property.

Investment Property

 The following are NOT considered investment property:

 Biological assets and Mineral rights and mineral reserves

 Property held for sale in the ordinary course of operations

 Property being constructed on behalf of third parties.

 Property held for future development and subsequent use as owner-occupied

property.

 Property occupied by employees.

 Owner-occupied property awaiting disposal.

 Property that is leased to another entity under a finance lease.

 Property held to provide a social service and which also generates cash inflows.

 Property held for strategic purposes.

 Property held for use in the production or supply of goods or services or for
administrative purposes.

Initial Measurement

 An investment property is initially measured at cost. The measurement of cost

depends on the mode of acquisition.

 Modes of Acquisition

a. Cash purchase – purchase price plus direct costs necessary in bringing the asset
to its intended condition.

b. Installment purchase – cash price equivalent

c. Non-exchange transaction – fair value at acquisition date

d. Self-construction – direct materials, labor, and construction overhead

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Subsequent Measurement

 Investment properties are subsequently measured at cost less accumulated

depreciation and accumulated impairment losses (i.e., Cost Model).

 Note: The fair value model is not allowed for government entities.

Transfers To or From Investment Property

 Transfers to or from investment property shall be made only when there is a

change in use.

 A government entity accounts for transfers to or from investment property at

cost. Accordingly, no gain or loss shall arise from the transfer, except when the
transferred asset is impaired.

Derecognition

 An investment property is derecognized when it is disposed or when it is

permanently withdrawn from use and no future economic benefits or service
potential is expected from its disposal.

 The difference between the net disposal proceeds (if any) and the carrying
amount is recognized as gain or loss in surplus or deficit.

Impairment

 An asset is impaired if its carrying amount exceeds its recoverable amount. The
excess represents impairment loss which shall be recognized in surplus or
deficit.

 Recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use.

 Value in use is the present value of the estimated future cash flows expected to
be derived from the continuing use of an asset and from its disposal at the end of
its useful life.

Reversal of Impairment

 The reversal of impairment shall not result to a carrying amount in excess of the
asset’s carrying amount had no impairment loss been recognized in prior
periods.

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Compensation from third parties

 Compensation from third parties for an investment property that was impaired,
lost or given up shall be recognized in surplus or deficit when the compensation
becomes receivable.

To know more information about CHAPTER 9- INVESTMENT PROPERTY- PLEASE

CLICK THE LINK: https://www.youtube.com/watch?v=ow5mnxqr3XQ

To know more information about CHAPTER 9- Transfer- PLEASE CLICK THE LINK:
https://www.youtube.com/watch?v=z4fv9gEp-rY

Reference:

Accounting for Government and Non-profit Organization by Zeus Vernon B.

Millan

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