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IFRS – IAS 40 Investment Property

IFRS IAS 40 Investment Property: Module focuses on the accounting and reporting of investment property in accordance with Section 16 Investment Property of the IFRS for SMEs. It introduces the learner to the subject, guides the learner through the official text, develops the learner’s understanding of the requirements through the use of examples and indicates significant judgements that are required in accounting for investment property.

Furthermore, the module includes questions designed to test the learner’s knowledge of the requirements and case studies to develop the learner’s ability to account for and disclose investment property in accordance with the IFRS for SMEs.

IFRS IAS 40 Investment Property

The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements. Investment property is property  held to earn rentals or for capital appreciation or both, rather than for:

  1. Use in the production or supply of goods or services or for administrative purposes; or
  2. Sale in the ordinary course of business.

IFRS IAS 40 Investment Property : A property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property provided that:

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  1. The rest of the definition of investment property is met.
  2. The operating lease is accounted for as if it were a finance lease in accordance with IAS 17 Leases.
  3. The lessee uses the fair value model set out in this Standard for the asset recognised.

IFRS IAS 40 Investment Property: Investment property shall be recognised as an asset when, and only when:

  1. It is probable that the future economic benefits that are associated with the investment property will flow to the entity.
  2. The cost of the investment property can be measured reliably. An investment property shall be measured initially at its cost.

Transaction costs shall be included in the initial measurement. The initial cost of a property interest held under a lease and classified as an investment property shall be as prescribed for a finance lease by paragraph 20 of IAS 17, ie the asset shall be recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be recognised as a liability in accordance with that same paragraph.

IFRS IAS 40 Investment Property: The Standard permits entities to choose either:

  1. A fair value model, under which an investment property is measured, after initial measurement, at fair value with changes in fair value recognised in profit or loss; or
  2. A cost model. The cost model is specified in IAS 16 and requires an investment property to be measured after initial measurement at depreciated cost.

IFRS IAS 40 Investment Property : An entity that chooses the cost model discloses the fair value of its investment property. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

An investment property shall be derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal.

Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless IAS 17 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.

IFRS IAS 40 Investment Property : History

Date Items Remarks
October 1984 Exposure Draft E26 Accounting for Investments published
March 1986 IAS 25 Accounting for Investments issued Operative for financial statements covering periods beginning on or after 1 January 1987
July 1999 Exposure Draft E64 Investment Property published Comment deadline 31 October 1999
April 2000 IAS 40 Investment Property (2000) issued Operative for annual financial statements beginning on or after 1 January 2001
May 2002 Exposure Draft Improvements to International Accounting Standards (2000) published Comment deadline 16 September 2002
18 December 2003 IAS 40 Investment Property (2003) issued Effective for annual periods beginning on or after 1 January 2005
22 May 2008 Amended by Annual Improvements to IFRSs 2007 Effective for annual periods beginning on or after 1 January 2009
12 December 2013 Amended by Annual Improvements to IFRSs 2011–2013 Cycle Effective for annual periods beginning on or after 1 July 2014
8 December 2016 Amended by Transfers of Investment Property  Effective for annual periods beginning on or after 1 July 2018

IFRS IAS 40 Investment Property: Learning Objective 

Upon successful completion of this module you should know the financial reporting requirements for investment property in accordance with the IFRS for SMEs.

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Furthermore, through the completion of case studies that simulate aspects of the real world application of that knowledge, you should have enhanced your competence to account for investment property in accordance with the IFRS for SMEs. In particular you should, in the context of the IFRS for SMEs, be able:

  • To distinguish investment property from other assets of an entity
  • To identify when items of investment property qualify for recognition in financial statements
  • To measure items of investment property on initial recognition and subsequently
  • To present and disclose investment property in financial statements
  • To identify when an item of investment property is to be derecognised or transferred to another classification of asset, and account for that derecognition or transfer
  • To demonstrate an understanding of significant judgements that are required in accounting for investment property.

IFRS IAS 40 Investment Property

IFRS for SMEs The IFRS for SMEs is intended to apply to the general purpose financial statements of entities that do not have public accountability. The IFRS for SMEs includes mandatory requirements and other material (non-mandatory) that is published with it. The material that is not mandatory includes:

  • A preface, which provides a general introduction to the IFRS for SMEs and explains its purpose, structure and authority.
  • Implementation guidance, which includes illustrative financial statements and a disclosure checklist.
  • The Basis for Conclusions, which summarises the IASB’s main considerations in reaching its conclusions in the IFRS for SMEs.
  • The dissenting opinion of an IASB member who did not agree with the publication of the IFRS for SMEs.

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IFRS IAS 40 Investment Property

IFRS IAS 40 Investment Property

IFRS IAS 40 Investment Property:

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