Study unit 4 Chapter 10
Investment property
4.1. IAS 40
▪ INVESTMENT PROPERTY (IP): Land or buildings or part thereof held by owner or right of use asset of tenant, to earn rental
income or capital appreciation rather than for:
Use in production, provision of services, admin purposes; or
Sales in the ordinary course of business.
What is NOT investment property? What is investment property?
▪ Owner-occupied property (IAS 16) ▪ Land held for LT capital appreciation rather than ST sale
▪ Leased property under finance lease (IFRS 16) ▪ Land held for undetermined future use
▪ Property held for sale (IAS 2) ▪ Building owned and leased out under operating lease
▪ Vacant building but wants to rent out under operating lease
▪ Property under construction / development for use as IP
▪ Mixed / joint use: Separate classification as:
Parts can be sold or leased separately
Cannot sell separately
Owner occupied is not significant = then investment property
If significant then IAS 16
▪ Measure EVERY year after FV! No depreciation; No impairment test (on FV model)
FV can always be measured reliably
▪ Investment property not under construction:
Before FV then continue with FV forever
Initial recognition - FV does not reliably measure then this particular property forever Cost model (even if other
investment property is fair value model)
▪ FV not available now:
Measure at cost until FV can be measured or construction is completed.
Becomes available during construction→ forever FV
Construction completed determines whether FV can measure sustainably.
If can = measure against FV
If not possible = measure against cost MODEL (depreciation and impairment)
▪ Summary:
Must use FV for other investment property unless initially determined FV cannot be measured reliably
Must use cost model as initially determined FV cannot be measured sustainably reliably
Deferred tax
▪ It is ASSUMED that investment property will be recovered through SALE EXCEPT (rebuttable) if:
Investment property is depreciable asset AND
It’s held within business model with intention of utilising the FEB over time from using property, rather than sell it
▪ FV adjustments recognised in P/L
4.2. Journal entries
Dr / Cr
Dr Depreciation (p/l)
1 Cr Accumulated depreciation (SFP)
Recognition of depreciation for the year
2 Dr Building: cost (SFP) = FV – CA
ACCC 371 @ NWU 2021 Ruané la Grange © 083 292 2662 1
Investment property
4.1. IAS 40
▪ INVESTMENT PROPERTY (IP): Land or buildings or part thereof held by owner or right of use asset of tenant, to earn rental
income or capital appreciation rather than for:
Use in production, provision of services, admin purposes; or
Sales in the ordinary course of business.
What is NOT investment property? What is investment property?
▪ Owner-occupied property (IAS 16) ▪ Land held for LT capital appreciation rather than ST sale
▪ Leased property under finance lease (IFRS 16) ▪ Land held for undetermined future use
▪ Property held for sale (IAS 2) ▪ Building owned and leased out under operating lease
▪ Vacant building but wants to rent out under operating lease
▪ Property under construction / development for use as IP
▪ Mixed / joint use: Separate classification as:
Parts can be sold or leased separately
Cannot sell separately
Owner occupied is not significant = then investment property
If significant then IAS 16
▪ Measure EVERY year after FV! No depreciation; No impairment test (on FV model)
FV can always be measured reliably
▪ Investment property not under construction:
Before FV then continue with FV forever
Initial recognition - FV does not reliably measure then this particular property forever Cost model (even if other
investment property is fair value model)
▪ FV not available now:
Measure at cost until FV can be measured or construction is completed.
Becomes available during construction→ forever FV
Construction completed determines whether FV can measure sustainably.
If can = measure against FV
If not possible = measure against cost MODEL (depreciation and impairment)
▪ Summary:
Must use FV for other investment property unless initially determined FV cannot be measured reliably
Must use cost model as initially determined FV cannot be measured sustainably reliably
Deferred tax
▪ It is ASSUMED that investment property will be recovered through SALE EXCEPT (rebuttable) if:
Investment property is depreciable asset AND
It’s held within business model with intention of utilising the FEB over time from using property, rather than sell it
▪ FV adjustments recognised in P/L
4.2. Journal entries
Dr / Cr
Dr Depreciation (p/l)
1 Cr Accumulated depreciation (SFP)
Recognition of depreciation for the year
2 Dr Building: cost (SFP) = FV – CA
ACCC 371 @ NWU 2021 Ruané la Grange © 083 292 2662 1
