Question added by Wasim khan wazir , Finance Specialist, Mott Macdonald
Date Posted: 2016/04/25
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by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies
As per IAS Forty
Investment property should be recognized as an asset when it is probable that the future economic benefits that are associated with the property will flow to the entity, and the cost of the property can be reliably measured.
Initial measurement
Investment property is initially measured at cost, including transaction costs. Such cost should not include start-up costs, abnormal waste, or initial operating losses incurred before the investment property achieves the planned level of occupancy.
Measurement subsequent to initial recognition
IAS 40 permits entities to choose between:
- A fair value model, and
- A cost model.
by Tamer Elbeshbishy , Finance Manager and Consultant , Al-KhayalHolding
by HASSAN AHMED , Internal Auditor , TIE
I agree with Mr. Shahbaz, explained very well with the help of IAS. I hope all have understood very well too.
by Abdul Khalique , Finance Manager , Value Real Estate & Construction
As per IAS 40:
Investment property shall be recognised as an asset when, and only when: (a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and(b) the cost of the investment property can be measured reliably.An entity evaluates under this recognition principle all its investment property costs at the time they are incurred. These costs include costs incurred initially to acquire an investment property and costs incurred subsequently to add to, replace part of, or service a property.Under the recognition principle in paragraph 16, an entity does not recognise in the carrying amount of an investment property the costs of the day-to-day servicing of such a property. Rather, these costs are recognised in profit or loss as incurred. Costs of day-to-day servicing are primarily the cost of labour and consumables, and may include the cost of minor parts. The purpose of these expenditures is often described as for the ‘repairs and maintenance’ of the property.
Parts of investment properties may have been acquired through replacement. For example, the interior walls may be replacements of original walls. Under the recognition principle, an entity recognises in the carrying amount of an investment property the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of this Standard.
by Rami Assaf , Plant Manager , Al Manaseer group
Thanks for invitation
I amagreeing with my colleague’sanswer
by Ahmed Mohamed Ayesh Sarkhi , Shared Services Supervisor , Saudi Musheera Co. Ltd.
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by Deleted user
Should be in line with IAS 40.
by Asim kuddoos , Accounts Adviser , Apeiron Accounting & Book-keeping LLC.
The objective of IAS Investment property is to prescribe the accounting treatment for investment
property and related disclosure requirements.
Recognition
Investment property should be recognised as an asset when two conditions are met.
(a) It is probable that the future economic benefits that are associated with the investment property
will flow to the entity.
(b) The cost of the investment property can be measured reliably.
Initial measurement
An investment property should be measured initially at its cost, including transaction costs.
Measurement subsequent to initial recognition
Entities can choose between:
fair value model, with changes in fair value being measured
cost model – the treatment most commonly used under IAS.
by حسين محمد ياسين , Finance Manager , مؤسسة عبد الماجد محمد العمر للمقاولات العامة
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As someone deeply immersed in the world of accounting and finance, I'd like to shed light on the concepts discussed in the provided article with a focus on International Accounting Standards (IAS), particularly IAS 40 - Investment Property. My extensive expertise in this domain allows me to break down the intricacies mentioned by the contributors.
First and foremost, IAS 40 establishes criteria for the recognition and measurement of investment properties. According to the standard, an investment property should be recognized as an asset when it is probable that future economic benefits associated with the property will flow to the entity, and the cost of the property can be reliably measured.
The initial measurement of investment property is at cost, inclusive of transaction costs. It's essential to note that this cost should not include start-up costs, abnormal waste, or initial operating losses incurred before the investment property achieves the planned level of occupancy.
IAS 40 provides flexibility in subsequent measurement, allowing entities to choose between two models:
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Fair Value Model: This involves measuring the investment property at fair value, with changes in fair value recognized in the financial statements.
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Cost Model: This is the more commonly used treatment under IAS, where the investment property is measured at cost, and depreciation is applied over its useful life.
Contributors to the discussion, such as Shahbaz Hayder and Abdul Khalique, rightly emphasize the importance of recognizing investment property costs at the time they are incurred. This includes not only the initial acquisition costs but also costs incurred subsequently to add to, replace part of, or service a property.
Moreover, Tamer Elbeshbishy highlights the significance of measuring both the cost of the project that will be converted into assets and the ability of the assets to generate income for the business in the future.
In conclusion, the insights shared by the contributors align with the principles outlined in IAS 40. Investment property is a critical aspect of financial reporting and requires careful consideration to ensure accurate recognition, measurement, and disclosure in accordance with international accounting standards.
