Investment property IAS 40

International financial reporting standards (IAS 40)

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:
  1. Fair value model – investment property is carried at fair value; or
  2. Cost model – investment property is carried in line with IAS 16.
  3. IAS 40 deals also with transfers of investment property, disposals of investment property and prescribes number of disclosures.

IAS 40 Investment Property applies to the accounting for property (land and/or buildings) held to earn rentals or for capital appreciation (or both). Investment properties are initially measured at cost and, with some exceptions. may be subsequently measured using a cost model or fair value model, with changes in the fair value under the fair value model being recognised in profit or loss.

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