International Financial Reporting Standards_guide.pdf

CHAPTER 11
Investment Property
(IAS 40)
11.1 OBJECTIVE
Entities may own property for use in their business or as an investment. In understanding
the amount, timing, and nature of future cash flows, users of financial statements would
want information about properties held for use separately from properties held for investment
purposes. The objective of IAS 40 is therefore to prescribe the accounting treatment and
disclosure requirements for investment property. The main issue in accounting for investment
properties is to distinguish these properties separately from owner-occupied properties.
The standard then gives entities a choice as to whether to measure all of their investment
properties at fair value or at cost. Whichever choice is exercised, the standard specifies that
the fair value amount of investment property should be disclosed.
11.2 SCOPE OF THE STANDARD
11.2.1 IAS 40 applies to all investment property.
11.2.2 Investment property includes land and buildings or part of a building or both. It
excludes
■ owner-occupied property (Property, Plant, and Equipment, IAS 16),
■ property held for sale in the short term in the ordinary course of business (Inventories,
IAS 2),
■ property being constructed or developed on behalf of third parties (Construction
Contracts, IAS 11),
■ property held by a lessee under an operating lease (Leases, IAS 17),
■ biological assets (Agriculture, IAS 41), and
■ mining rights and mineral resources (Exploration for and Evaluation of Mineral
Resources, IFRS 6).
11.3 KEY CONCEPTS
11.3.1 Investment property is property (land and building or part of a building or both)
that is held by the owner or by the lessee under a finance lease to earn rentals, or for capital
appreciation, or both, rather than for use in the production or supply of goods or services or
for administration or for sale in the ordinary course of business.
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