International Accounting Standard 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.

• Summary of IAS 40 Investment Property
• 3 Biggest Myths in Accounting for PPE - this article points out the biggest false belief about the PPE and investment property and contains small examples

For more closely related articles, please revise IAS 16 here.

• Is hotel an investment property? - you will find out that there's no definitive answer. Instead, you must do a bit of thinking and assessment.
• How to account for transfers from owner-occupied property under revaluation model to investment property under fair value model?
• How to account for investment gold? - maybe in a similar way as for investment property.
• Accounting for transfer of an asset from the owner-occupied PPE to the investment property

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