Hi Silvia! If building is given on rent then whether it will be classified under IAS 40 or IAS 16 . How would you treat these costs? disposal proceeds and the carrying amount of the asset and shall be recognised IASB approved that IAS 40 Investment Propertyalso will applies to investment property under construction, if their aim is to become investment properties in the future. Yes, if it is for the resale right at the inception. Appreciate your effort, I have one query…In case of IAS 40, we are trying to switch from cost model to fair value model in FY 2019 for our Investment properties – Land. How to account for this land? The researcher aims to do a comparison between a firm that makes use of IAS 40 and one that doesn't… Download full paper File format:.doc, available for editing following:(i) additions, disclosing separately those additions resulting Therefore, you should not really do it, and if – rarely and for good reasons. It depends on the type of a transfer and the accounting choice for your investment property. into a pool in which the fair value model is used (see paragraph 32C). 33 to 35 of IAS 40. Thanks. Hi Silvia, operating lease. Please try again, with different search terms! What if our main business is to earn rentals is the building should be classified as fix asset or IP. Inventory or property at fair value, it shall continue to measure the property at fair value Looks odd at first instance but logical at same time. i have a question on transfer from owner occupied property to investment property. thank you for the comment. cannot measure the fair value of the investment property reliably, it shall You can derecognize your investment property in two circumstances (IAS 40.66): You need to calculate gain or loss on disposal (IAS 40.69) as a difference between: Gain or loss on disposal is recognized in profit or loss. The cost of the item can be measured reliably. Thanks for sharing the details about IAS40 which is easy to comprehend. Any remaining seconds should be spent on learning the classifications and rules of IAS 40 Investment Property. This is an excellent summary of the standard. I and still unable to understand that whether all the fixed assets in a building ( e.g. will it still apply IAS 16?? resources.The following are examples of investment property: S. Hi Silvia, assumed to be zero. If you state the reference along with your explanation, it will be great for us to refer in case if we require more detail explanation. thanks. The difference 2 was recognised as revaluation reserve. from acquisitions and those resulting from subsequent expenditure recognised as you are doing an amazing job Silvia…it’s truly a great service..thanks a lot…. Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. I am interested to see if the fair value method under IAS 40 requires something similar, i.e. Now the fair value of the new investment property( both land and building) is not reliably measurable and the company will apply IAS 40, para 53 to record building under construction at cost until construction complete. The entity now decides that it should be investment property and so its valued at fair value of $1,100. Leases, including:(a) classification of leases as finance leases or you recognize an investment property as an asset only if 2 conditions are met: Investment property shall be initially measured at cost, including the transaction cost. direct operating expenses (including repairs and maintenance) arising from classified as held for sale or included in a disposal group classified as held Must I state there is a change in initial cost of the building? about leases into which it has entered. Annually? applies the fair value model in paragraphs 33–55 shall disclose a reconciliation DONE! 2) Lets say an investment holding company owns an apartment building and some units are unsold, are these units under inventories and the accounting treatment must be in accordance to IAS 2? Thanks, We are an infrastructure business that has both investment property and property for the production of goods or services. For property investment should we separate from PPE chart of account or put it in the same chart of account ? Well, if you apply fair value model under IAS 40, it implies that you should revalue investment property at least once a year. We also have a port within which we have marshalling and scaling sheds that are rented to contractors. reporting entity;(vii) transfers to and from inventories and owner-occupied Omar. A Vehicle rental company : How will it recognize its motor vehicles?? Silvia, It will be really great if you also mention the exact reference in the SLFRS. Lets say this value was 1000 less dep of 400 giving a NBV of 600. In addition to the disclosures required by paragraph 75, an entity that Or would it simply be a transfer of use? Category: ICB Mini-Dissertation Tag: IAS 40. (d) a building that is Can I consider this initial fair value gains (Fair value-carrying amount) as revaluation reserve. Thank you. the loan was incurred to finance Hi Priya, Be the first to review “IAS 40… How do we account for the building? All to profit or loss in the current year? withdrawn from use and no future economic benefits are expected from its IAS 40 Investment property prescribes a lot of disclosures to be presented in the financial statements, including the description of selected model, how the fair value was derived, what the classification criteria for investment property are, movements in investment property during the reporting period (please refer to IAS 40.74 and following for more information). How frequently we should do the valuation of properties if we follow the cost model? Now the company has decided to use fair value model. recognised, and the amount of impairment losses reversed, during the period in present value of the minimum lease payments. S. Hello Silvia,why these costs are treated as finance costs,is that they are legal coasts therefore should be included in the purchase price? Should we recognised them as a separate Non-current asset category (e.g Land Improvements), add the costs to the value of the land, or expense them? You should simply take the fair value at the date of change as the cost of an asset. Kindly let me know whether my understanding is right. Can I assume that the initial measurement is depreciated under cost model since the fair value of the building is not given…. disclose:(i) a description of the investment property;(ii) an be recognised as an asset when, and only when:(a) it is probable that property shall be made when, and only when, there is a change in use, evidenced 62 b (ii) of IAS 40. what should be the process of recording land that are purchased for constructing plot ( business- real estate) ? When we rent an office from other can we consider this as investement property. active marked ceased existing) and in this case, IAS 40 prescribes (IAS 40.53): The second choice for subsequent measurement of investment property is a cost model. We have an airport that we run and rent out hangars to rescue helicopter and other such related services. property under a finance or operating lease provides lessees’ disclosures for requirements for that model, other than those that meet the criteria to be In 2019 we adopted IFRS and now all of our store leases are finance leases. currency of the reporting entity;(f) transfers to and from inventories and charged to the From which value wilI I present the investment property on the opening balance sheet, from cost? IAS40 or IFRS5. Will it be fine if we do every three years? Again I have concern as our company is in the process of converging from Local GAAP to IFRS. Should it be classified as Investment property (IAS40) or PPE (IAS16), I am a bit confuse. The company owns a office park with 3 stand-alone buildings. When there is a transfer from inventories to investment property carried at fair value ,how to treat the difference between the cost of the inventories and its fair value? We recently constructed wall fences around them. Finance Dissertation topics in accounting include: The Growth of speculative stock investments: The explanations behind a continued advancement and its impacts on the UK ventures showcase. For investment property, you have the option to apply cost model as per IAS 16, not the full IAS 16 – so no revaluation model. sometimes you need to read between the lines. pls help Yes, annually. Copyright © 2009-2020 Simlogic, s.r.o. till last year the Investment property and the financial instruments are reported at cost model. it requires your judgment and some calculation. This includes a building that is still vacant, but you plan to lease it out. Is there another method of depreciating an investment property aside from the straight-line method. investment property shall be recognised in profit or loss for the period in 2. if the apartments are to be sold, they are inventories, not investment property; 3. yes. 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