Syllabus C. Reporting The Financial Performance Of A Range Of Entities C2. Non Current Assets

C2c. Investment Property Part 2 11 / 16

Syllabus C2c)

Discuss and apply the accounting treatment of investment properties including classification, recognition, measurement and change of use.

When can we bring an Investment Property into the accounts?

As with everything else, an investment property should be recognised when:

  1. It is probable that the future economic benefits will flow; and

  2. The cost of the investment property can be measured reliably.

Cool - and at how much do we show it at initially?

Initially measured at cost.

This includes:

  1. Purchase price

  2. Directly attributable costs, for example transaction costs (professional fees, property transfer taxes)

This does not include:

  1. Start-up costs

  2. Operating losses incurred before the investment property achieves the planned level of occupancy

  3. Abnormal amounts of wasted labour, material or other resources incurred in constructing or developing the property


If the property is held under a lease then you must show it initially at the lower of:

  • •Fair value and

  • •The present value of the minimum lease payments

Ok so how do we value it after the initial cost?

You choose between two models:

  1. The IAS 16 cost model

  2. The fair value model

The policy chosen should be applied consistently to all of the entity’s investment property.

If the property is held under an operating lease the fair value model must be adopted.

Cost model

Basically as per IAS 16. The property is measured at cost less depreciation and impairment losses (the fair value should still be disclosed though).

Fair value model

All investment properties should be measured at fair value at the end of each reporting period.

Changes in fair value added to / subtracted from the asset and the other side recognised in the income statement.

No depreciation is therefore ever recognised.