Overview of IAS 40

• Issued: in 2000; re-issued in 2003, followed by amendments

• Effective date: 1 January 2005

• What it does:

  
  

  • IAS 40 defines investment property as property (land, building, part of a building or both) held to earn rentals or for capital appreciation or both, regardless the way of holding it (by the owner or under the finance lease as the lessee).

  • It brings examples of what the investment property is and what it is not.

  • Further classification issues are addressed, e.g.:

    • Property partially earning rentals and partially held for own use,

    • Ancillary services,

    • Intercompany rentals, etc.

  • It prescribes rules for recognition and measurement of investment property.

  • Investment property shall be at its recognition measured at cost.

  • For subsequent measurement, 2 models are allowed:

    1. Fair value model – investment property is carried at fair value; or

    2. Cost model – investment property is carried in line with IAS 16.

    3. IAS 40 deals also with transfers of investment property, disposals of investment property and prescribes number of disclosures.

• IAS 40 Investment Property applies to the accounting for property (land and/or buildings) held to earn rentals or for capital appreciation (or both). Investment properties are initially measured at cost and, with some exceptions. may be subsequently measured using a cost model or fair value model, with changes in the fair value under the fair value model being recognised in profit or loss.

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