IAS – 40 (Investment property):

 

·         Definition: Land or building owned by an entity that is held to earn rentals or for capital appreciation rather than business use or owner occupied.

·         Recognition:

-  Probable future economic benefits will flow to the entity

-  Cost of the investment property can be measured reliably

·         Measurement:
1. Cost model: Cost – Accumulated depreciation
2. Fair value model: At year-end –
-  If increase in fair value: Investment property Gain in fair value (SOPL)	DR	CR
- If decrease in fair value:   Loss on fair value (SOPL)   Investment property	DR	CR

  If index factor given: Fair value = Existing value X New factor

Existing factor

Transfers: If change in use takes place (i.e. transfer to or from investment property)

   -  If owner occupied property turns into investment property - the property would be  revalued up to             date of change in use to transfer it at fair value under IAS-40.

    - If investment property turns into owner occupied property - the property’s cost for subsequent             accounting would be the fair value at the date of change in use