Overview of IAS 40
- Issued: in 2000; re-issued in 2003, followed by amendments
- Effective date: 1 January 2005
- What it does:
- IAS 40 defines investment property as property (land, building, part of a building or both) held to earn rentals or for capital appreciation or both, regardless the way of holding it (by the owner or under the finance lease as the lessee).
- It brings examples of what the investment property is and what it is not.
- Further classification issues are addressed, e.g.:
- Property partially earning rentals and partially held for own use,
- Ancillary services,
- Intercompany rentals, etc.
- It prescribes rules for recognition and measurement of investment property.
- Investment property shall be at its recognition measured at cost.
- For subsequent measurement, 2 models are allowed:
- Fair value model – investment property is carried at fair value; or
- Cost model – investment property is carried in line with IAS 16.
- IAS 40 deals also with transfers of investment property, disposals of investment property and prescribes number of disclosures.
Articles about IAS 40
- Summary of IAS 40 Investment Property
- 3 Biggest Myths in Accounting for PPE - this article points out the biggest false belief about the PPE and investment property and contains small examples
For more closely related articles, please revise IAS 16 here.
Questions and Answers
- Is hotel an investment property? - you will find out that there's no definitive answer. Instead, you must do a bit of thinking and assessment.
- How to account for transfers from owner-occupied property under revaluation model to investment property under fair value model?
- How to account for investment gold? - maybe in a similar way as for investment property.
- Accounting for transfer of an asset from the owner-occupied PPE to the investment property
Other Resources
- IFRS Kit - learn IFRS in 150+ videos, 150+ excel case studies, quizzes, certificates
