Ias 40 International Accounting Standard 40 Investment-Books Pdf

IAS 40 International Accounting Standard 40 Investment
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Classification of property as investment property or owner. occupied property, 7 Investment property is held to earn rentals or for capital appreciation or both Therefore. an investment property generates cash flows largely independently of the other assets. held by an entity This distinguishes investment property from owner occupied. property The production or supply of goods or services or the use of property for. administrative purposes generates cash flows that are attributable not only to property. but also to other assets used in the production or supply process IAS 16 applies to. owned owner occupied property and IFRS 16 Leases applies to owner occupied. property held by a lessee as a right of use asset, 8 The following are examples of investment property. a land held for long term capital appreciation rather than for short term sale in. the ordinary course of business, b land held for a currently undetermined future use If an entity has not. determined that it will use the land as owner occupied property or for short. term sale in the ordinary course of business the land is regarded as held for. capital appreciation, c a building owned by the entity or a right of use asset relating to a building held. by the entity and leased out under one or more operating leases. d a building that is vacant but is held to be leased out under one or more operating. e property that is being constructed or developed for future use as investment. 9 The following are examples of items that are not investment property and are therefore. outside the scope of this Standard, a property intended for sale in the ordinary course of business or in the process of.
construction or development for such sale see IAS 2 Inventories for example. property acquired exclusively with a view to subsequent disposal in the near. future or for development and resale, c owner occupied property see IAS 16 and IFRS 16 including among other. things property held for future use as owner occupied property property held. for future development and subsequent use as owner occupied property. property occupied by employees whether or not the employees pay rent at. market rates and owner occupied property awaiting disposal. e property that is leased to another entity under a finance lease. A1306 IFRS Foundation, 10 Some properties comprise a portion that is held to earn rentals or for capital appreciation. and another portion that is held for use in the production or supply of goods or services. or for administrative purposes If these portions could be sold separately or leased out. separately under a finance lease an entity accounts for the portions separately If the. portions could not be sold separately the property is investment property only if an. insignificant portion is held for use in the production or supply of goods or services or. for administrative purposes, 11 In some cases an entity provides ancillary services to the occupants of a property it. holds An entity treats such a property as investment property if the services are. insignificant to the arrangement as a whole An example is when the owner of an office. building provides security and maintenance services to the lessees who occupy the. 12 In other cases the services provided are significant For example if an entity owns and. manages a hotel services provided to guests are significant to the arrangement as a. whole Therefore an owner managed hotel is owner occupied property rather than. investment property, 13 It may be difficult to determine whether ancillary services are so significant that a. property does not qualify as investment property For example the owner of a hotel. sometimes transfers some responsibilities to third parties under a management contract. The terms of such contracts vary widely At one end of the spectrum the owner s. position may in substance be that of a passive investor At the other end of the. spectrum the owner may simply have outsourced day to day functions while. retaining significant exposure to variation in the cash flows generated by the operations. of the hotel, 14 Judgement is needed to determine whether a property qualifies as investment property.
An entity develops criteria so that it can exercise that judgement consistently in. accordance with the definition of investment property and with the related guidance in. paragraphs 7 13 Paragraph 75 c requires an entity to disclose these criteria when. classification is difficult, 14A Judgement is also needed to determine whether the acquisition of investment property is. the acquisition of an asset or a group of assets or a business combination within the. scope of IFRS 3 Business Combinations Reference should be made to IFRS 3 to. determine whether it is a business combination The discussion in paragraphs 7 14 of. this Standard relates to whether or not property is owner occupied property or. investment property and not to determining whether or not the acquisition of property is. a business combination as defined in IFRS 3 Determining whether a specific transaction. meets the definition of a business combination as defined in IFRS 3 and includes an. investment property as defined in this Standard requires the separate application of both. 15 In some cases an entity owns property that is leased to and occupied by its parent or. another subsidiary The property does not qualify as investment property in the. consolidated financial statements because the property is owner occupied from the. perspective of the group However from the perspective of the entity that owns it the. property is investment property if it meets the definition in paragraph 5 Therefore the. lessor treats the property as investment property in its individual financial statements. IFRS Foundation A1313, Recognition, 16 An owned investment property shall be recognised as an asset when and only. a it is probable that the future economic benefits that are associated with the. investment property will flow to the entity and, b the cost of the investment property can be measured reliably. 17 An entity evaluates under this recognition principle all its investment property costs at. the time they are incurred These costs include costs incurred initially to acquire an. investment property and costs incurred subsequently to add to replace part of or service. a property, 18 Under the recognition principle in paragraph 16 an entity does not recognise in the. carrying amount of an investment property the costs of the day to day servicing of. such a property Rather these costs are recognised in profit or loss as incurred Costs of. day to day servicing are primarily the cost of labour and consumables and may. include the cost of minor parts The purpose of these expenditures is often described as. for the repairs and maintenance of the property, 19 Parts of investment properties may have been acquired through replacement For.
example the interior walls may be replacements of original walls Under the recognition. principle an entity recognises in the carrying amount of an investment property the cost. of replacing part of an existing investment property at the time that cost is incurred if the. recognition criteria are met The carrying amount of those parts that are replaced is. derecognised in accordance with the derecognition provisions of this Standard. 19A An investment property held by a lessee as a right of use asset shall be recognised in. accordance with IFRS 16, Measurement at recognition. 20 An owned investment property shall be measured initially at its cost Transaction. costs shall be included in the initial measurement. 21 The cost of a purchased investment property comprises its purchase price and any. directly attributable expenditure Directly attributable expenditure includes for example. professional fees for legal services property transfer taxes and other transaction costs. 22 Deleted, 23 The cost of an investment property is not increased by. a start up costs unless they are necessary to bring the property to the condition. necessary for it to be capable of operating in the manner intended by. management, b operating losses incurred before the investment property achieves the planned. level of occupancy or, c abnormal amounts of wasted material labour or other resources incurred in. constructing or developing the property, A1310 IFRS Foundation.
24 If payment for an investment property is deferred its cost is the cash price equivalent. The difference between this amount and the total payments is recognised as interest. expense over the period of credit, 25 Deleted, 26 Deleted. 27 One or more investment properties may be acquired in exchange for a non monetary. asset or assets or a combination of monetary and non monetary assets The following. discussion refers to an exchange of one non monetary asset for another but it also. applies to all exchanges described in the preceding sentence The cost of such an. investment property is measured at fair value unless a the exchange transaction lacks. commercial substance or b the fair value of neither the asset received nor the asset. given up is reliably measurable The acquired asset is measured in this way even if an. entity cannot immediately derecognise the asset given up If the acquired asset is not. measured at fair value its cost is measured at the carrying amount of the asset given up. 28 An entity determines whether an exchange transaction has commercial substance by. considering the extent to which its future cash flows are expected to change as a result of. the transaction An exchange transaction has commercial substance if. a the configuration risk timing and amount of the cash flows of the asset. received differs from the configuration of the cash flows of the asset transferred. b the entity specific value of the portion of the entity s operations affected by the. transaction changes as a result of the exchange and. c the difference in a or b is significant relative to the fair value of the assets. For the purpose of determining whether an exchange transaction has commercial. substance the entity specific value of the portion of the entity s operations affected by. the transaction shall reflect post tax cash flows The result of these analyses may be. clear without an entity having to perform detailed calculations. 29 The fair value of an asset is reliably measurable if a the variability in the range of. reasonable fair value measurements is not significant for that asset or b the. probabilities of the various estimates within the range can be reasonably assessed and. used when measuring fair value If the entity is able to measure reliably the fair value of. either the asset received or the asset given up then the fair value of the asset given up is. used to measure cost unless the fair value of the asset received is more clearly evident. 29A An investment property held by a lessee as a right of use asset shall be measured. initially at its cost in accordance with IFRS 16, Measurement after recognition. Accounting policy, 30 With the exception noted in paragraph 32A an entity shall choose as its accounting. policy either the fair value model in paragraphs 33 55 or the cost model in. paragraph 56 and shall apply that policy to all of its investment property. A1312 IFRS Foundation, 31 IAS 8 Accounting Policies Changes in Accounting Estimates and Errors states that a. voluntary change in accounting policy shall be made only if the change results in the. financial statements providing reliable and more relevant information about the effects of. transactions other events or conditions on the entity s financial position financial. performance or cash flows It is highly unlikely that a change from the fair value model. to the cost model will result in a more relevant presentation. 32 This Standard requires all entities to measure the fair value of investment property for. the purpose of either measurement if the entity uses the fair value model or disclosure. if it uses the cost model An entity is encouraged but not required to measure the fair. value of investment property on the basis of a valuation by an independent valuer who. holds a recognised and relevant professional qualification and has recent experience in. the location and category of the investment property being valued. 32A An entity may, a choose either the fair value model or the cost model for all investment.
property backing liabilities that pay a return linked directly to the fair. value of or returns from specified assets including that investment. property and, b choose either the fair value model or the cost model for all other investment. property regardless of the choice made in a, 32B Some insurers and other entities operate an internal property fund that issues notional. units with some units held by investors in linked contracts and others held by the entity. Paragraph 32A does not permit an entity to measure the property held by the fund partly. at cost and partly at fair value, 32C If an entity chooses different models for the two categories described in paragraph 32A. sales of investment property between pools of assets measured using different models. shall be recognised at fair value and the cumulative change in fair value shall be. recognised in profit or loss Accordingly if an investment property is sold from a pool in. which the fair value model is used into a pool in which the co. construction or development for such sale see IAS 2 Inventories for example property acquired exclusively with a view to subsequent disposal in the near future or for development and resale

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