DipIFR Syllabus B. Elements of financial statements - Investment Property Part 2 - Notes 14 / 15
When can we bring an Investment Property into the accounts?
As with everything else, an investment property should be recognised when:
It is probable that the future economic benefits will flow; and
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:
Purchase price
Directly attributable costs, for example transaction costs (professional fees, property transfer taxes)
This does not include:
Start-up costs
Operating losses incurred before the investment property achieves the planned level of occupancy
Abnormal amounts of wasted labour, material or other resources incurred in constructing or developing the property
NB
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:
The IAS 16 cost model
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.