IAS 40 Investment property Part 1

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A building (or land) owned but not used - just an investment

The building is not used it just makes cash by:

  1. its FV going up (capital appreciation) or

  2. from rental income

It might not even belong to the entity it could even be just on an operating lease.

This is still an IP (if the FV model is used)

This allows leased land (which is normally an operating lease) to be classified as investment property.

Land held for indeterminate future use is an investment property where the entity has not decided that it will use the land as owner occupied or for short-term sale

Accounting treatment for the Rental Income

  1. Add it to the income statement

  2. Easy! (Even for a gonk like you!) :p

Accounting treatment for the FV increase

  • The difference in FV each year goes to the I/S

  • Double easy - double gonky

No depreciation is needed because it's not used :)

Give me examples of what can be Investment Properties cowy.

ok you asked for it:

  1. Land held for long-term capital appreciation rather than short-term sale

  2. Land held for a currently undetermined future use

    This basically means they haven't yet decided what to do with the land

  3. A building owned but leased to a third party under an operating lease

  4. A building which is vacant but is held to be leased out under an operating lease

  5. Property being constructed or developed for future use as an investment property

Ok smarty pants - what ISN'T an Investment property?

  • Property intended for sale in the ordinary course of business

    (It's stock!)

  • Owner-occupied property

  • Property leased to another entity under a finance lease

  • Property being constructed for third parties

Parts of property

These can be investment properties if the different sections can be sold or leased separately.

  • Mais oui, monsier/madame 

    For example, company owns a building and uses 4 floors and rents out 1. The latter can be an IP while the rest is treated as normal PPE

Can it still be an IAS 40 Investment property if we are involved in the building still by giving services to it?

Si Claro hombre/mujer - It´’s still an IAS 40 Investment property if the supply is small and insignificant.

  • If it’s a significant part of the deal with the tenant then the property becomes an IAS 16 property.

What if my subsidiary uses it but I don’t?

Right ok - now your questions are getting on my nerves… but still - it’s an IAS 40 Investment property in your own individual accounts - because you personally are not using it.

However, in the group accounts it´s an IAS 16 property because someone in the group is using it.

..now enough of the questions already.. get back to facebook ..

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