IAS 40 provides guidance on accounting for investment property, which is property held to earn rentals or for capital appreciation rather than for use in production. It requires investment property to be initially measured at cost and then either at fair value or cost model after initial recognition. Under the fair value model, all changes in fair value are recognized in profit or loss for the period. The standard also provides guidance on transfers, disposals, disclosures and transitional provisions for investment property.

1. IAS 40INVESTMENT PROPERTY9/14/20091IAS 40 Investment Property

2. OBJECTIVE & SCOPERecognition, measurement & disclosure Matters excludedInvestment propertyInvestment property under finance lease in lesee’s FSInvestment property under operating lease in lessor’s FSClassification of leasesLease income from investment propertyOperating leases in lessee’s financial statementsFinance lease in lessor’s FSSale and leaseback transactionsDisclosure of finance and operating leasesBiological assetsMineral rights and reserves9/14/20092IAS 40 Investment Property

3. Definitions9/14/20093IAS 40 Investment Property

4. Definitions9/14/20094IAS 40 Investment Property

5. Classification alternative9/14/20095IAS 40 Investment Property

6. Examples of investment property9/14/20096IAS 40 Investment Property

7. Combinations and ancillary services9/14/2009IAS 40 Investment Property7

8. Recognition9/14/2009IAS 40 Investment Property8

9. Measurement at recognition9/14/2009IAS 40 Investment Property9

10. Exclude from cost at recognition9/14/2009IAS 40 Investment Property10

11. Investment property held under a lease9/14/2009IAS 40 Investment Property11

12. Investment property exchanged for another assetFair value of asset given up unless FV of asset received more clearly evidentCarrying value of asset given up9/14/2009IAS 40 Investment Property12

13. Measurement after recognition: Accounting Policy9/14/2009IAS 40 Investment Property13

14. Fair Value9/14/2009IAS 40 Investment Property14

15. Fair Value Model9/14/2009IAS 40 Investment Property15Measure all investment properties at fair valueInvestment under operating lease may not be measured at cost after initial recognition; it must be measured at fair valueRecognise gains and losses from changes in fair value in the profit and loss account until disposalOnce held for sale, measure investment property according to IFRS 5Fair value must reflect market conditions at the balance sheet dateCurrent prices in active market for similar property in same location and condition under similar lease or other contractCurrent/recent prices adjusted to reflect differencesIf reasonable estimate of fair value not available for a particular property, use IAS 16 cost model in exceptional casesResidual value must be zeroApply IAS 16 cost model until disposal

16. Transfers to and from investment property9/14/2009IAS 40 Investment Property16

17. Disposals9/14/2009IAS 40 Investment Property17Derecognise from balance sheet when no future economic benefit expectedNet disposal proceeds – carrying amount = profit/loss in period of disposalIas 17 for sale and leasebackRecognise compensation for impairment or loss in profit & loss when receivable

18. Disclosure: Fair Value Model & Cost Model9/14/2009IAS 40 Investment Property18

19. Disclosure: Fair Value Model and Cost Model9/14/2009IAS 40 Investment Property19

20. Cost model: Additional disclosure9/14/2009IAS 40 Investment Property20Depreciation methods usedUseful livesGross carrying amountAccumulated depreciation and impairment loss at beginning and end of periodReconciliation of carrying amount at beginning and end of periodAdditionsFrom subsequent expenditureFrom acquisitionsAssets classified as held for saleDepreciationImpairment loss recognised and reversedNet exchange differences on translationTransfers to and from inventories and owner-occupied propertyFair value of investment property orDescription of propertyReason why fair value cannot be determinedRange of estimates in which fair value is likely to lie

21. Fair value model: Additional disclosure9/14/2009IAS 40 Investment Property21Reconciliation between carrying amount at beginning and end of periodAdditionsFrom acquisitionFrom subsequent expenditureFrom acquisitions through business combinationsAssets classified as held for saleNet gain or loss from fair value adjustmentsNet exchange difference on translationTransfer to and from inventories and owner-occupied propertyOther changes

22. Transitional provisions9/14/2009IAS 40 Investment Property22Apply initial measurement in exchange of assets prospectively to future transactions only.Entity elects for the first time to classify all eligible property under operating lease as investment propertyAdjust opening balance of retained earnings in period election first madeIf no fair value previously disclosed, do not adjust opening balance of retained earnings for earlier period or restate comparativesIf fair value previously disclosed, encouraged but not required to: Adjust opening balance of retained earnings for earliest period presentedRestate comparative information for those periods

23. Summary9/14/2009IAS 40 Investment Property23Investment property is held for rent or capital appreciationMeasure initially at cost including transactions costsChoose fair value or cost model after initial recognition and apply to all propertiesRecognise all investment property under operating lease at fair value after recognitionRecognise changes in fair value in profit & loss for the periodClassify according to IFRS 5 once held for saleTransfer when investment property becomes owner-occupied or used in another wayDerecognise when disposed and recognise profit or loss on disposalMake detailed disclosures and reconciliations of opening and closing carrying values