Investment property IAS 40

Question 1

What is the definition of investment property?

Answer 1

IAS 40
* Property (land or a building — or part of a building — or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for:

‒ use in the production or supply of goods or services or for administrative purposes (PP&E)
‒ sale in the ordinary course of business (Inventory)

Question 2

How is investment property measured?

Answer 2

IAS 40
* Measured at cost upon initial recognition
* Subsequent to initial recognition entity has a choice* of:

1. Fair value model
   * Property is measured at FV and any gain/loss from change in
   FV is recognized in income for the period
   * No depreciation is taken
2. Cost model
   * When cost model is used still need to disclose FV unless it cannot be determined
   * Whichever model is chosen must be applied to all investment property

*exception is when property is held under an operating lease – FV model must be used