Corporate Reporting- MFRS140, IAS40 Investment Properties

1. MFRS140 –
Investment
Property
Dayana Mastura, FCCA (UK), CA(M)
CORPORATE REPORTING

2. MFRS 140 -
Definition
Investment property is land or a building ‘held
to earn rentals or for capital appreciation or
both’,rather than for use by the entity or for
sale in the ordinary course of business.
Owner-occupied property is excluded from the
definition of investment property
MFRS 140 - Investment Properties. These
could be spare properties rented out to third
parties, or specifically bought in order to
profit from a gain in value.

3. Dual use properties
There could be a situation where a building can be accounted for in
two different ways.
If an entity occupies a premises but rents out certain floors to other
companies;
then the part occupied will be classed as property, plant and
equipment per MFRS 116,
with the floors rented out classed as investment property per MFRS
140.

4. • If a building is rented by a subsidiary of
the entity, then the building will be
classed as an investment property –
MFRS140 in the individual accounts, but
will be classed as property, plant and
equipment per MFRS116 in the
consolidated financial statements.
• This is because the asset will be used by
the group, so must be accounted for in
accordance with MFRS116.
Consolidated accounts

5. Accounting
treatment
Investment properties should
initially be measured at cost.
MFRS140 then gives a choice for
subsequent measurement between
the following:
· cost model
· fair value model.
Once the model is chosen it must be
used for all investment properties.

6. Cost Model
• Under the cost model the asset should be accounted for in line
with the cost model laid out in MFRS116.

7. Fair value model
• Under the fair value model:
• the asset is revalued to fair value at the end of each year
• the gain or loss is shown directly in the statement of profit or loss (not
other comprehensive income)
• no depreciation is charged on the asset.
• Fair value is normally established by reference to current prices on an
active market for properties in the same location and condition.

8. PPE (MFRS116)
to Investment
Property
(MFRS140)
If an asset is transferred from
property, plant and equipment to
investment property and the fair
value model for investment
property is used:
· The asset must first be revalued
per MFRS116 (creating a revaluation
surplus in equity) and then
transferred into investment
property at fair value.

9. Cost Model for MFRS140
If the cost model is
used for investment
properties:
· The asset is
transferred into
investment properties
at the current carrying
amount and continues
to be depreciated.

10. Investment
Property
(MFRS140) to
PPE (MFRS116)
If an asset is transferred from
investment property to property,
plant and equipment and the fair
value model for investment
property is used:
· Revalue the property first per
MFRS140 (taking the gain or loss to
the statement of profit or loss) and
then transfer to property, plant and
equipment at fair value.

11. Cost Model for MFRS140
If the cost model is used for investment
properties:
· The asset is transferred into property,
plant and equipment at the current carrying
amount and continues to be depreciated.

12. Thank you 