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Chapter 4: Investment Properties

4.1 RECOGNITION

• investment property can be recognised as an asset if:

o it is probable that future economic benefits associated with the investment property

will flow to the entity

o

 purchase price to the investment property can be measured reliably• there are three types of investment property

o owner-occupied property

 building that is owner-occupied can be classified as investment property only

if the owner-occupied portion is significant

o ancillary services provided

if ancillary services provided is insignificant then the entity may treat the

 property as investment property

o intra-group rental

 property rented to members of the group can be classified as investment

 property in the individual financial statements

•

maintenance costs measured daily are not recognised, such as house maintenance• subsequent costs for replacement of parts of the property are recognised if the expenditure

meets the recognition criteria

4.2 MEASUREMENT

• all investment properties are measured at cost

• this includes transaction cost

• cost of purchased investment property consists of the purchase price and any direct

attributable expenditure such as legal fees

4.2.1 air !a"#e Mo$e"

•

fair value of investment property should reflect the actual market state and circumstances asof the balance sheet date, not as any future date

• it is required to apply fair value model up until the disposal of the asset or until there is a

change in use

• recognition of a gain or loss arising from a change in fair value of investment should be in the

income statement as of its arose period

• fair value is not recoverable amount

4.2.2 Cost Mo$e"

• should measure all of its investment properties at cost less any accumulated depreciation and

any accumulated impairment losses

4.% TRANSERS

• transfer from or to investment property are allowed only when there is a change in use and

evidenced by:

o transfer from investment property to owner-occupied property on commencement of

owner-occupation

o transfer from investment property to inventories on commencement of development

with view to sale

o transfer from owner-occupied property to investment property at the end of the

owner-occupation

o transfer from inventories to investment property at the commencement of an

operating lease

o transfer from property in the course of construction or development to investment property at the end of construction or development

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4.4 &ISPOSA'

• an investment property should be removed from balance sheet on disposal or when the

investment property is withdrawn from use permanently and no future economic benefits are

expected from its disposal

• from the difference between net disposal proceeds and carrying amount of the asset we can

determine the gain or loss arising from the disposal or retirement and this should berecognised as income or expense in the income statement

4.( &ISC'OSURES

• comparative information is required for all disclosures

• for both fair value and cost model, an entity should disclose the following information

o if it applies to the fair value model, in any circumstances, property interests held

under operating leases are classified and accounted for as an investment property

o when it is difficult to classify, the criteria used to differentiate investment property

from owner-occupied property and from property “held for sale” in the ordinary

course of business rental income from investment property

o the methods and assumptions applied in determining the fair value of investment

 property including a statement of determination of fair value was supported by

market evidence or heavily because of the nature of the property and lack of

comparable market dates

o fair value of investment property extents based on a valuation by an independent

valuer who holds a recognised and relevant professional qualification and has

experiences in the location and category of the investment property being valued

o if there is no valuation, the fact should be disclosed

o the amounts recognised in profit or loss for:

rental income from investment property

direct operating expenses (including maintenance and repairs incurred from

investment property that generate rental income during the period

direct operating expenses (including maintenance and repairs incurred frominvestment property that do not generate rental income during the period

o the amount of restrictions on the reliability of investment property or the remittance

of income and proceeds of disposal

o contractual obligations to construct, purchase or develop investment property or for

repairs, maintenance or enhancement