INVESTMENT PROPERTY (IP) However, if these ancillary services
Property (Land or building or part of are a significant component of the
building or both) held by an owner or arrangement, it is treated as an owner-
by the lessee under a finance lease occupied property.
to earn rentals or for capital
appreciation or both. Can be separated:
Equipment or movable property Owner-occupied – PPE
cannot qualify as IP. Rented – IP
Not held for: (If so, owner-occupied
property)
a. Use in the production or Cannot be separated:
supply of goods or services Owner-occupied
or for administrative Insignificant – IP
purposes. More significant – PPE
b. For sale in the ordinary
course of business. Insignificant
(e.g, security and maintenance services)
Purpose Classification
Held to earn rentals or for
Classification – IP
capital appreciation or Investment property
both More Significant
Property, plant and
Owner-occupied (e.g. owner-managed hotel)
equipment (PPE)
Held for sale in the ____________________________________________
ordinary course of Inventory
business
Held for sale in accordance Non-current asset held for PROPERTY LEASED TO AN AFFILIATE
with PFRS 5 sale.
Individual entity
Property leased to another subsidiary
Examples:
or parent = Investment property.
Land held for long-term capital
appreciation
Group/ Consolidation
Land held for a currently
Property is treated as owner-
undetermined use.
occupied property.
Building owned leased out under
operating lease
RECOGNITION OF INVESTMENT
Building owned that is vacant, leased
PROPERTY
out under operating lease.
Probable that economic benefits will
Property being constructed or
flow to the entity
developed for future use as
The cost of the investment property
investment property.
can be measured reliably.
PARTLY INVESTMENT AND PARTLY
INITIAL MEASUREMENT OF
OWNER-OCCUPIED
INVESTMENT PROPERTY
If these properties can be sold or
Initial measurement
leased out separately, it shall be accounted
Cost
separately as investment property and
Transaction costs are included.
owner-occupied property.
Cost of purchased investment property
If not, the property is investment
comprises: purchased price and any
property if only an insignificant portion is
directly attributable costs (professional
held for manufacturing or administrative
fees, legal services, property transfer
purposes.
taxes…etc.)
When ancillary services are provided
Costs excluded:
and is relatively insignificant, the property
1. Start up costs (unless necessary for
is treated as investment property.
conditioning of the asset)
2. Operating losses (incurred before the 2. Commencement of development
investment property achieves the with a view to sale-transfer from
planned level of occupancy) investment property to inventory.
3. Abnormal amounts of wasted 3. End of owner occupation- transfer
materials, labor and other resources. from owner-occupied property to
investment property.
SUBSEQUENT MEASUREMENT OF 4. Inception of an operating lease to
PROPERTY another entity- transfer from owner-
1. Fair value model occupied property to investment
a. Changes in FV are recorded in property.
P/L
b. No depreciation is recorded for MEASUREMENT OF TRANSFERS
the investment property. 1. When the entity uses the cost model,
c. Not tested for impairment transfers between IP, OOCP and
2. Cost model Inventory shall be made at carrying
a. Cost – Accumulated amount.
Depreciation – accumulated 2. Investment property at FV to Owner-
impairment losses. occupied property = FV (cost for
b. Does not recognize any subsequent accounting)
change in the fair value. 3. OOCP to IP that is to be carried at fair
c. The fair value of the asset is value, the difference between FV and
disclosed at every year-end. CA shall be accounted for as the
revaluation of PPE.
FAIR VALUE OF INVESTMENT PROPERTY 4. Inventory to IP that is to be carried at
The price in the principal market FV, remeasurement to FV shall be
used to measure the fair value shall not be included in the P/L.
adjusted for transaction cost 5. IP under construction is completed
and to be carried at FV, the
The fair value of investment property difference between FV and CA, shall
excludes prepaid or accrued operating be included in the P/L.
lease income.
DERECOGNITION OF INVESTMENT
INABILITY TO DETERMINE FAIR VALUE PROPERTY
RELIABLY 1. On disposal
If the fair value of the asset cannot 2. When the investment property is
be determined reliably on a continuing permanently withdrawn from use.
basis as it was first acquired or an existing 3. When no future economic benefits
property becomes investment property, the are expected from the investment
following are the remedies: property.
1. Exceptional cases, PAS 40, par 53.
Measured at cost method until the DISCLOSURES
disposal of the investment property. General disclosures
a. The residual value of the 1. Whether the entity uses the cost
investment property shall be model or fair value model
assumed to be zero. 2. The amount of rental income with
the related expense.
TRANSFERS OF INVESTMENT 3. Restrictions on the investment
PROPERTY property
1. Commencement of owner occupation 4. Contractual obligations to purchase
or development with view to owner- or construct investment property.
occupation – transfer from
investment property to owner- Fair value model is used
occupied property. 1. Detailed reconciliation between CA of
IP at the beginning and end of the
period.
2. The method of determining the FV of
IP and whether the valuation is
carried out by an independent
qualifier.
3. Net gains or losses from fair value
adjustments.
4. Whether significant fixtures, such as
lift and office furniture’s, within an
investment property, have been
separately recognized.
Cost model is used;
1. The depreciation method or rate and
useful life
2. Detailed reconciliation of the gross
cost of investment property and the
related accumulated depreciation
3. FV of the investment property where
possible. If it is not possible, such
fact shall be explained.
