Inability to determine fair value reliably 53. There is a rebuttable presumption that an entity can reliably determine the fair value of an investment property on a continuing basis. However, in exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the fair value of the investment property is not reliably determinable on a continuing basis. This arises when, and only when, comparable market transactions are infrequent and alternative reliable estimates of fair value (for example, based on discounted cash flow projections) are not available. If an entity determines that the fair value of an investment property under construction is not reliably determinable but expects the fair value of the property to be reliably determinable when construction is complete, it shall determine the fair value of that investment property either when its fair value becomes reliably determinable or construction is completed (whichever is earlier). If an entity determines that the fair value of an investment property (other than an investment property under construction) is not reliably determinable on a continuing basis, the entity shall make the disclosures required by paragraph s 79(e)(i), (ii) and (iii). 53A. Once an entity becomes able to measure reliably the fair value of an investment property under construction for which the fair value was not previously determined, it shall determine the fair value of that property . Once construction of that property is complete, it is presumed that fair value can be measured reliably. If this is not the case, in accordance with paragraph 53, the entity shall make the disclosures required by paragraphs 79(e)(i), (ii) and (iii). 53B. The presumption that the fair value of investment property under construction can be measured reliably can be rebutted only on initial recognition. An entity that has determined the fair value of an item of investment property under construction may not conclude that the fair value of the completed investment property cannot be determined reliably. 54. In the exceptional cases when an entity is compelled, for the reason given in paragraph 53, to make the disclosures required by paragraph s 79(e)(i), (ii) and (iii), it shall determine the fair value of all its other investment property, including investment property under construction. In these cases, although an entity may make the disclosures required by paragraph s 79(e)(i), (ii) and (iii) for one investment property, the entity shall continue to determine the fair value of each of the remaining properties for disclosure required by paragraph 79(e). 55. If an entity has previously determined the fair value of an investment property, it shall continue to determine the fair value of that property until disposal (or until the property becomes owner-occupied property or the entity begins to develop the property for subsequent sale in the ordinary course of business) even if comparable market transactions become less frequent or market prices become less readily available. **Cost model** 56. After initial recognition, an entity shall measure all of its investment properties in accordance with Ind AS 16’s requirements for cost model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations. Investment properties that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) shall be measured in accordance with Ind AS 105.

Measurement after recognition Accounting policy 30. An entity shall adopt as its accounting policy the cost model prescribed in paragraph 56 to all of its investment property. 31. [Refer to Appendix 1] 32. This Standard requires all entities to determine the fair value of investment property for the purpose of disclosure even though they are required to follow the cost model. An entity is encouraged, but not required, to determine 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. Fair value determination 33-35. [Refer to Appendix 1] 36. The fair value of investment property is the price at which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction (see paragraph 5). Fair value specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale. 37. An entity determines fair value without any deduction for transaction costs it may incur on sale or other disposal. 38. The fair value of investment property shall reflect market conditions at the end of the reporting period. 39. Fair value is time-specific as of a given date. Because market conditions may change, the amount reported as fair value may be incorrect or inappropriate if estimated as of another time. The definition of fair value also assumes simultaneous exchange and completion of the contract for sale without any variation in price that might be made in an arm’s length transaction between knowledgeable, willing parties if exchange and completion are not simultaneous. 40. The fair value of investment property reflects, among other things, rental income from current leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would assume about rental income from future leases in the light of current conditions. It also reflects, on a similar basis, any cash outflows (including rental payments and other outflows) that could be expected in respect of the property. Some of those outflows are reflected in the liability whereas others relate to outflows that are not recognised in the financial statements until a later date (eg periodic payments such as contingent rents). 41. [Refer to Appendix 1] 42. The definition of fair value refers to ‘knowledgeable, willing parties’. In this context, ‘knowledgeable’ means that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the investment property, its actual and potential uses, and market conditions at the end of the reporting period. A willing buyer is motivated, but not compelled, to buy. This buyer is neither over-eager nor determined to buy at any price. The assumed buyer would not pay a higher price than a market comprising knowledgeable, willing buyers and sellers would require. 43. A willing seller is neither an over -eager nor a forced seller, prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in current market conditions. The willing seller is motivated to sell the investment property at market terms for the best price obtainable. The factual circumstances of the actual investment property owner are not a part of this consideration because the willing seller is a hypothetical owner (eg a willing seller would not take into account the particular tax circumstances of the actual investment property owner). 44. The definition of fair value refers to an arm’s length transaction. An arm’s length transaction is one between parties that do not have a particular or special relationship that makes prices of transactions uncharacteristic of market conditions. The transaction is presumed to be between unrelated parties, each acting independently. 45. The best evidence of fair value is given by current prices in an active market for similar property in the same location and condition and subject to similar lease and other contracts. An entity takes care to identify any differences in the nature, location or condition of the property, or in the contractual terms of the leases and other contracts relating to the property. 46. In the absence of current prices in an active market of the kind described in paragraph 45, an entity considers information from a variety of sources, including: (a) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; (b) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (c) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. 47. In some cases, the various sources listed in the previous paragraph may suggest different conclusions about the fair value of an investment property. An entity considers the reasons for those differences, in order to arrive at the most reliable estimate of fair value within a range of reasonable fair value estimates. 48. In exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the variability in the range of reasonable fair value estimates will be so great, and the probabilities of the various outcomes so difficult to assess, that the usefulness of a single estimate of fair value is negated. This may indicate that the fair value of the property will not be reliably determinable on a continuing basis (see paragraph 53). 49. Fair value differs from value in use, as defined in Ind AS 36 Impairment of Assets. Fair value reflects the knowledge and estimates of knowledgeable, willing buyers and sellers. In contrast, value in use reflects the entity’s estimates, including the effects of factors that may be specific to the entity and not applicable to entities in general. For example, fair value does not reflect any of the following factors to the extent that they would not be generally available to knowledgeable, willing buyers and sellers: (a) additional value derived from the creation of a portfolio of properties in different locations; (b) synergies between investment property and other assets; (c) legal rights or legal restrictions that are specific only to the current owner; and (d) tax benefits or tax burdens that are specific to the current owner. 50. [Refer to Appendix 1] 51. The fair value of investment property does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future expenditure. 52. [Refer to Appendix 1]

**Measurement at recognition** 20. An 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. [Refer to Appendix 1] 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. 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. 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 Ind AS 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. 26. Any premium paid for a lease is treated as part of the minimum lease payments for this purpose, and is therefore included in the cost of the asset, but is excluded from the liability. If a property interest held under a lease is classified as investment property, the item accounted for at fair value is that interest and not the underlying property. Guidance on determining the fair value of a property interest is set out in paragraphs 33–52. That guidance is also relevant to the determination of fair value when that value is used as cost for initial recognition purposes. 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 no n-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, or (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 exchanged. 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 for which comparable market transactions do not exist is reliably measurable if (a) the variability in the range of reasonable fair value estimates is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. If the entity is able to determine 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.

**Recognition** 16. Investment property shall be recognised a s an asset when, and only when: (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.

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 building. 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. 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.

Definitions 5. The following terms are used in this Standard with the meanings specified: Carrying amount is the amount at which an asset is recognised in the balance sheet. Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Indian Accounting Standards, eg Ind AS 102 Share-based Payment. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business. Owner-occupied property is property held (by the owner or by the lessee under a finance lease) for use in the production or supply of goods or services or for administrative purposes. 6. [Refer to Appendix 1] 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. Ind AS 16 Property, Plant and Equipment applies to owner occupied property. 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 regard ed as held for capital appreciation.) (c) a building owned by the entity (or held by the entity under a finance lease) 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 leases. (e) property that is being constructed or developed for future use as investment property. 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 Ind AS 2 Inventories), for example, property acquired exclusively with a view to subsequent disposal in the near future or for development and resa le. (b) property being constructed or developed on behalf of third parties (see Ind AS 11 Construction Contracts). (c) owner-occupied property (see Ind AS 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. (d) [Refer to Appendix 1] (e) property that is leased to another entity under a finance lease.

HIII FRIEND.... Investment Property (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) **Objective** 1. The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements. **Scope** 2. This Standard shall be applied in the recognition, measurement and disclosure of investment property. 3. Among other things, this Standard applies to the measurement in a lessee’s financial statements of investment property interests held under a lease accounted for as a finance lease and to the measurement in a lessor’s financial statements of investment property provided to a lessee under an operating lease. This Standard does not deal with matters covered in Ind AS 17 Leases, including: (a) classification of leases as finance leases or operating leases; (b) recognition of lease income from investment property (see also Ind AS 18 Revenue); (c) measurement in a lessee’s financial statements of property interests held under a lease accounted for as an operating lease; (d) measurement in a lessor’s financial statements of its net investment in a finance lease; (e) accounting for sale and leaseback transactions; and (f) disclosure about finance leases and operating leases. 4 This Standard does not apply to: (a) biological assets related to agricultural activity (see Ind AS 41 Agriculture1); and (b) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. Note - 1 Ind AS 41 Agriculture is under formulation.