Investment Property

In April 2001 the International Accounting Standards Board (Board) adopted IAS 40
Investment Property, which had originally been issued by the International Accounting
Standards Committee in April 2000. That Standard had replaced some parts of IAS 25
Accounting for Investments, which had been issued in March 1986 and had not already been
replaced by IAS 39 Financial Instruments: Recognition and Measurement.
In December 2003 the Board issued a revised IAS 40 as part of its initial agenda of
technical projects.
In January 2016, IFRS 16 Leases made various amendments to IAS 40, including expanding
its scope to include both owned investment property and investment property held by a
lessee as a right-of-use asset.
In December 2016, the Board issued Transfers of Investment Property (Amendments to
IAS 40) which clarifies when there is a transfer to, or from, investment property.
Other Standards have made minor consequential amendments to IAS 40. They include
IFRS 13 Fair Value Measurement (issued May 2011), Annual Improvements to IFRSs 2011–2013
Cycle (issued December 2013), IFRS 15 Revenue from Contracts with Customers (issued
May 2014), Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) (issued June 2014),
IFRS 17 Insurance Contracts (issued May 2017) and Amendments to References to the Conceptual
Framework in IFRS Standards (issued March 2018).

International Accounting Standard 40 Investment Property (IAS 40) is set out
in paragraphs 1–86. All the paragraphs have equal authority but retain the IASC
format of the Standard when it was adopted by the IASB. IAS 40 should be read in the
context of its objective and the IASB’s Basis for Conclusions, the Preface to IFRS
Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors provides a basis for selecting and applying
accounting policies in the absence of explicit guidance.

International Accounting Standard 40
Investment Property
Objective

The objective of this Standard is to prescribe the accounting treatment for
investment property and related disclosure requirements.

Scope

This Standard shall be applied in the recognition, measurement and
disclosure of investment property.
[Deleted]
This Standard does not apply to:
(a) biological assets related to agricultural activity (see IAS 41 Agriculture
and IAS 16 Property, Plant and Equipment); and
(b) mineral rights and mineral reserves such as oil, natural gas and similar
non-regenerative resources.

Definitions

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
statement of financial position.
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 IFRSs, eg IFRS 2 Share-based Payment.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. (See IFRS 13 Fair Value Measurement).
Investment property is property (land or a building—or part of a building—
or both) held (by the owner or by the lessee as a right-of-use asset) 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 as a
right-of-use asset) for use in the production or supply of goods or services
or for administrative purposes.

Classification of property as investment property or
owner-occupied property

[Deleted]
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. IAS 16 applies to owned owner-occupied
property and IFRS 16 Leases applies to owner-occupied property held by a
lessee as a right-of-use asset.
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 regarded
as held for capital appreciation.)
(c) a building owned by the entity (or a right-of-use asset relating to a
building held by the entity) 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.
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 IAS 2
Inventories), for example, property acquired exclusively with a view to
subsequent disposal in the near future or for development and resale.
(b) [deleted]
(c) owner-occupied property (see IAS 16 and IFRS 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) [deleted]
(e) property that is leased to another entity under a finance lease.

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.
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.
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.
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.
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.
Judgement is also needed to determine whether the acquisition of investment
property is the acquisition of an asset or a group of assets or a business
combination within the scope of IFRS 3 Business Combinations. Reference should
be made to IFRS 3 to determine whether it is a business combination. The
discussion in paragraphs 7–14 of this Standard relates to whether or not
property is owner-occupied property or investment property and not to
determining whether or not the acquisition of property is a business
combination as defined in IFRS 3. Determining whether a specific transaction
meets the definition of a business combination as defined in IFRS 3 and
includes an investment property as defined in this Standard requires the
separate application of both Standards.
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.

Recognition

An owned investment property shall be recognized as 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.
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.
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.
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.
An investment property held by a lessee as a right-of-use asset shall be
recognized in accordance with IFRS 16.

Measurement at recognition

An owned investment property shall be measured initially at its cost.
Transaction costs shall be included in the initial measurement.
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.
[Deleted]
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, labor or other resources
incurred in constructing or developing the property.
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
recognized as interest expense over the period of credit.
[Deleted]
[Deleted]
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
non-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 derecognize 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.
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.
The fair value of an asset is reliably measurable if (a) the variability in the
range of reasonable fair value measurements is not significant for that asset or
(b) the probabilities of the various estimates within the range can be
reasonably assessed and used when measuring fair value. If the entity is able
to measure 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.

An investment property held by a lessee as a right-of-use asset shall be
measured initially at its cost in accordance with IFRS 16.

Measurement after recognition
Accounting policy

With the exception noted in paragraph 32A, an entity shall choose as its
accounting policy either the fair value model in paragraphs 33–55 or the
cost model in paragraph 56 and shall apply that policy to all of its
investment property.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors states that a
voluntary change in accounting policy shall be made only if the change results
in the financial statements providing reliable and more relevant information
about the effects of transactions, other events or conditions on the entity’s
financial position, financial performance or cash flows. It is highly unlikely
that a change from the fair value model to the cost model will result in a more
relevant presentation.
This Standard requires all entities to measure the fair value of investment
property, for the purpose of either measurement (if the entity uses the fair
value model) or disclosure (if it uses the cost model). An entity is encouraged,
but not required, to measure 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.
An entity may:
(a) choose either the fair value model or the cost model for all
investment property backing liabilities that pay a return linked
directly to the fair value of, or returns from, specified assets
including that investment property; and
(b) choose either the fair value model or the cost model for all other
investment property, regardless of the choice made in (a).
Some entities operate, either internally or externally, an investment fund that
provides investors with benefits determined by units in the fund. Similarly,
some entities issue insurance contracts with direct participation features, for
which the underlying items include investment property. For the purposes of
paragraphs 32A–32B only, insurance contracts include investment contracts
with discretionary participation features. Paragraph 32A does not permit an
entity to measure property held by the fund (or property that is an underlying
item) partly at cost and partly at fair value. (See IFRS 17 Insurance Contracts for
terms used in this paragraph that are defined in that Standard.)
If an entity chooses different models for the two categories described in
paragraph 32A, sales of investment property between pools of assets measured
using different models shall be recognized at fair value and the cumulative
change in fair value shall be recognized in profit or loss. Accordingly, if an investment property is sold from a pool in which the fair value model is used
into a pool in which the cost model is used, the property’s fair value at the
date of the sale becomes its deemed cost.

Fair value model

After initial recognition, an entity that chooses the fair value model shall
measure all of its investment property at fair value, except in the cases
described in paragraph 53.
[Deleted]
A gain or loss arising from a change in the fair value of investment
property shall be recognised in profit or loss for the period in which it
arises.
[Deleted]
When measuring the fair value of investment property in accordance with
IFRS 13, an entity shall ensure that the fair value reflects, among other things,
rental income from current leases and other assumptions that market
participants would use when pricing investment property under current
market conditions.
When a lessee uses the fair value model to measure an investment property
that is held as a right-of-use asset, it shall measure the right-of-use asset, and
not the underlying property, at fair value.
IFRS 16 specifies the basis for initial recognition of the cost of an investment
property held by a lessee as a right-of-use asset. Paragraph 33 requires the
investment property held by a lessee as a right-of-use asset to be remeasured,
if necessary, to fair value if the entity chooses the fair value model. When
lease payments are at market rates, the fair value of an investment property
held by a lessee as a right-of-use asset at acquisition, net of all expected lease
payments (including those relating to recognised lease liabilities), should be
zero. Thus, remeasuring a right-of-use asset from cost in accordance with
IFRS 16 to fair value in accordance with paragraph 33 (taking into account the
requirements in paragraph 50) should not give rise to any initial gain or loss,
unless fair value is measured at different times. This could occur when an
election to apply the fair value model is made after initial recognition.
[Deleted]
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 measurements will be so great, and the probabilities of the various
outcomes so difficult to assess, that the usefulness of a single measure of fair
value is negated. This may indicate that the fair value of the property will not
be reliably measurable on a continuing basis (see paragraph 53).
[Deleted]

In determining the carrying amount of investment property under the fair
value model, an entity does not double-count assets or liabilities that are
recognized as separate assets or liabilities. For example:
(a) equipment such as lifts or air-conditioning is often an integral part of a
building and is generally included in the fair value of the investment
property, rather than recognized separately as property, plant and
equipment.
(b) if an office is leased on a furnished basis, the fair value of the office
generally includes the fair value of the furniture, because the rental
income relates to the furnished office. When furniture is included in
the fair value of investment property, an entity does not recognize that
furniture as a separate asset.
(c) the fair value of investment property excludes prepaid or accrued
operating lease income, because the entity recognizes it as a separate
liability or asset.
(d) the fair value of investment property held by a lessee as a right-of-use
asset reflects expected cash flows (including variable lease payments
that are expected to become payable). Accordingly, if a valuation
obtained for a property is net of all payments expected to be made, it
will be necessary to add back any recognized lease liability, to arrive at
the carrying amount of the investment property using the fair value
model.
[Deleted]
In some cases, an entity expects that the present value of its payments relating
to an investment property (other than payments relating to recognized
liabilities) will exceed the present value of the related cash receipts. An entity
applies IAS 37 Provisions, Contingent Liabilities and Contingent Assets to determine
whether to recognize a liability and, if so, how to measure it.

Inability to measure fair value reliably

There is a rebuttable presumption that an entity can reliably measure 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 measurable on a continuing basis. This
arises when, and only when, the market for comparable properties is
inactive (eg there are few recent transactions, price quotations are not
current or observed transaction prices indicate that the seller was forced
to sell) and alternative reliable measurements 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 measurable but expects the fair value of the
property to be reliably measurable when construction is complete, it shall
measure that investment property under construction at cost until either
its fair value becomes reliably measurable 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 measurable on a continuing basis, the entity
shall measure that investment property using the cost model in IAS 16 for
owned investment property or in accordance with IFRS 16 for investment
property held by a lessee as a right-of-use asset. The residual value of the
investment property shall be assumed to be zero. The entity shall continue
to apply IAS 16 or IFRS 16 until disposal of the investment property.
Once an entity becomes able to measure reliably the fair value of an
investment property under construction that has previously been measured at
cost, it shall measure that property at its fair value. 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 property shall be
accounted for using the cost model in accordance with IAS 16 for owned assets
or IFRS 16 for investment property held by a lessee as a right-of-use asset.
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 measured an item of investment property
under construction at fair value may not conclude that the fair value of the
completed investment property cannot be measured reliably.
In the exceptional cases when an entity is compelled, for the reason given in
paragraph 53, to measure an investment property using the cost model in
accordance with IAS 16 or IFRS 16, it measures at fair value all its other
investment property, including investment property under construction. In
these cases, although an entity may use the cost model for one investment
property, the entity shall continue to account for each of the remaining
properties using the fair value model.
If an entity has previously measured an investment property at fair value, it
shall continue to measure the property at fair value 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

After initial recognition, an entity that chooses the cost model shall
measure investment property:
(a) in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations if it meets the criteria to be classified as held
for sale (or is included in a disposal group that is classified as held
for sale);
(b) in accordance with IFRS 16 if it is held by a lessee as a right-of-use
asset and is not held for sale in accordance with IFRS 5; and
(c) in accordance with the requirements in IAS 16 for the cost model in
all other cases.

Transfers

An entity shall transfer a property to, or from, investment property when,
and only when, there is a change in use. A change in use occurs when the
property meets, or ceases to meet, the definition of investment property
and there is evidence of the change in use. In isolation, a change in
management’s intentions for the use of a property does not provide
evidence of a change in use. Examples of evidence of a change in use
include:
(a) commencement of owner-occupation, or of development with a view
to owner-occupation, for a transfer from investment property to
owner-occupied property;
(b) commencement of development with a view to sale, for a transfer
from investment property to inventories;
(c) end of owner-occupation, for a transfer from owner-occupied
property to investment property; and
(d) inception of an operating lease to another party, for a transfer from
inventories to investment property.
(e) [deleted]
When an entity decides to dispose of an investment property without
development, it continues to treat the property as an investment property
until it is derecognised (eliminated from the statement of financial position)
and does not reclassify it as inventory. Similarly, if an entity begins to
redevelop an existing investment property for continued future use as
investment property, the property remains an investment property and is not
reclassified as owner-occupied property during the redevelopment.
Paragraphs 60–65 apply to recognition and measurement issues that arise
when an entity uses the fair value model for investment property. When an
entity uses the cost model, transfers between investment property,
owner-occupied property and inventories do not change the carrying amount
of the property transferred and they do not change the cost of that property
for measurement or disclosure purposes.
For a transfer from investment property carried at fair value to
owner-occupied property or inventories, the property’s deemed cost for
subsequent accounting in accordance with IAS 16, IFRS 16 or IAS 2 shall be
its fair value at the date of change in use.
If an owner-occupied property becomes an investment property that will be
carried at fair value, an entity shall apply IAS 16 for owned property and
IFRS 16 for property held by a lessee as a right-of-use asset up to the date of
change in use. The entity shall treat any difference at that date between the
carrying amount of the property in accordance with IAS 16 or IFRS 16 and
its fair value in the same way as a revaluation in accordance with IAS 16.

Up to the date when an owner-occupied property becomes an investment

property carried at fair value, an entity depreciates the property (or the right-
of-use asset) and recognizes any impairment losses that have occurred. The entity treats any difference at that date between the carrying amount of the
property in accordance with IAS 16 or IFRS 16 and its fair value in the same
way as a revaluation in accordance with IAS 16. In other words:
(a) any resulting decrease in the carrying amount of the property is
recognized in profit or loss. However, to the extent that an amount is
included in revaluation surplus for that property, the decrease is
recognized in other comprehensive income and reduces the
revaluation surplus within equity.
(b) any resulting increase in the carrying amount is treated as follows:
(i) to the extent that the increase reverses a previous impairment
loss for that property, the increase is recognized in profit or
loss. The amount recognized in profit or loss does not exceed
the amount needed to restore the carrying amount to the
carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognized.
(ii) any remaining part of the increase is recognized in other
comprehensive income and increases the revaluation surplus
within equity. On subsequent disposal of the investment
property, the revaluation surplus included in equity may be
transferred to retained earnings. The transfer from revaluation
surplus to retained earnings is not made through profit or loss.
For a transfer from inventories to investment property that will be carried
at fair value, any difference between the fair value of the property at that
date and its previous carrying amount shall be recognized in profit or loss.
The treatment of transfers from inventories to investment property that will
be carried at fair value is consistent with the treatment of sales of inventories.
When an entity completes the construction or development of a
self-constructed investment property that will be carried at fair value, any
difference between the fair value of the property at that date and its
previous carrying amount shall be recognized in profit or loss.

Disposals

An investment property shall be derecognized (eliminated from the
statement of financial position) on disposal or when the investment
property is permanently withdrawn from use and no future economic
benefits are expected from its disposal.
The disposal of an investment property may be achieved by sale or by entering
into a finance lease. The date of disposal for investment property that is sold is
the date the recipient obtains control of the investment property in
accordance with the requirements for determining when a performance obligation is satisfied in IFRS 15. IFRS 16 applies to a disposal effected by
entering into a finance lease and to a sale and leaseback.
If, in accordance with the recognition principle in paragraph 16, an entity
recognises in the carrying amount of an asset the cost of a replacement for
part of an investment property, it derecognises the carrying amount of the
replaced part. For investment property accounted for using the cost model, a
replaced part may not be a part that was depreciated separately. If it is not
practicable for an entity to determine the carrying amount of the replaced
part, it may use the cost of the replacement as an indication of what the cost
of the replaced part was at the time it was acquired or constructed. Under the
fair value model, the fair value of the investment property may already reflect
that the part to be replaced has lost its value. In other cases it may be difficult
to discern how much fair value should be reduced for the part being replaced.
An alternative to reducing fair value for the replaced part, when it is not
practical to do so, is to include the cost of the replacement in the carrying
amount of the asset and then to reassess the fair value, as would be required
for additions not involving replacement.
Gains or losses arising from the retirement or disposal of investment
property shall be determined as the difference between the net disposal
proceeds and the carrying amount of the asset and shall be recognised in
profit or loss (unless IFRS 16 requires otherwise on a sale and leaseback) in
the period of the retirement or disposal.
The amount of consideration to be included in the gain or loss arising from
the derecognition of an investment property is determined in accordance with
the requirements for determining the transaction price in paragraphs 47–72
of IFRS 15. Subsequent changes to the estimated amount of the consideration
included in the gain or loss shall be accounted for in accordance with the
requirements for changes in the transaction price in IFRS 15.
An entity applies IAS 37 or other Standards, as appropriate, to any liabilities
that it retains after disposal of an investment property.
Compensation from third parties for investment property that was
impaired, lost or given up shall be recognised in profit or loss when the
compensation becomes receivable.
Impairments or losses of investment property, related claims for or payments
of compensation from third parties and any subsequent purchase or
construction of replacement assets are separate economic events and are
accounted for separately as follows:
(a) impairments of investment property are recognised in accordance with
IAS 36;
(b) retirements or disposals of investment property are recognised in
accordance with paragraphs 66–71 of this Standard;
(c) compensation from third parties for investment property that was
impaired, lost or given up is recognised in profit or loss when it
becomes receivable; and

(d) the cost of assets restored, purchased or constructed as replacements is
determined in accordance with paragraphs 20–29 of this Standard.

Disclosure
Fair value model and cost model

The disclosures below apply in addition to those in IFRS 16. In accordance
with IFRS 16, the owner of an investment property provides lessors’
disclosures about leases into which it has entered. A lessee that holds an
investment property as a right-of-use asset provides lessees’ disclosures as
required by IFRS 16 and lessors’ disclosures as required by IFRS 16 for any
operating leases into which it has entered.
An entity shall disclose:
(a) whether it applies the fair value model or the cost model.
(b) [deleted]
(c) when classification is difficult (see paragraph 14), the criteria it uses
to distinguish investment property from owner-occupied property
and from property held for sale in the ordinary course of business.
(d) [deleted]
(e) the extent to which the fair value of investment property
(as measured or disclosed in the financial statements) is based on 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. If
there has been no such valuation, that fact shall be disclosed.
(f) the amounts recognised in profit or loss for:
(i) rental income from investment property;
(ii) direct operating expenses (including repairs and
maintenance) arising from investment property that
generated rental income during the period;
(iii) direct operating expenses (including repairs and
maintenance) arising from investment property that did not
generate rental income during the period; and
(iv) the cumulative change in fair value recognised in profit or
loss on a sale of investment property from a pool of assets in
which the cost model is used into a pool in which the fair
value model is used (see paragraph 32C).

(g) the existence and amounts of restrictions on the realizability of
investment property or the remittance of income and proceeds of
disposal.

(h) contractual obligations to purchase, construct or develop
investment property or for repairs, maintenance or enhancements.

Fair value model

In addition to the disclosures required by paragraph 75, an entity that
applies the fair value model in paragraphs 33–55 shall disclose a
reconciliation between the carrying amounts of investment property at the
beginning and end of the period, showing the following:
(a) additions, disclosing separately those additions resulting from
acquisitions and those resulting from subsequent expenditure
recognised in the carrying amount of an asset;
(b) additions resulting from acquisitions through business
combinations;
(c) assets classified as held for sale or included in a disposal group
classified as held for sale in accordance with IFRS 5 and other
disposals;
(d) net gains or losses from fair value adjustments;
(e) the net exchange differences arising on the translation of the
financial statements into a different presentation currency, and on
translation of a foreign operation into the presentation currency of
the reporting entity;
(f) transfers to and from inventories and owner-occupied property; and
(g) other changes.
When a valuation obtained for investment property is adjusted
significantly for the purpose of the financial statements, for example to
avoid double-counting of assets or liabilities that are recognised as separate
assets and liabilities as described in paragraph 50, the entity shall disclose a
reconciliation between the valuation obtained and the adjusted valuation
included in the financial statements, showing separately the aggregate
amount of any recognised lease liabilities that have been added back, and
any other significant adjustments.
In the exceptional cases referred to in paragraph 53, when an entity
measures investment property using the cost model in IAS 16 or in
accordance with IFRS 16, the reconciliation required by paragraph 76 shall
disclose amounts relating to that investment property separately from
amounts relating to other investment property. In addition, an entity shall
disclose:
(a) a description of the investment property;
(b) an explanation of why fair value cannot be measured reliably;
(c) if possible, the range of estimates within which fair value is highly
likely to lie; and
(d) on disposal of investment property not carried at fair value:

(i) the fact that the entity has disposed of investment property
not carried at fair value;
(ii) the carrying amount of that investment property at the time
of sale; and
(iii) the amount of gain or loss recognized.

Cost model

In addition to the disclosures required by paragraph 75, an entity that
applies the cost model in paragraph 56 shall disclose:
(a) the depreciation methods used;
(b) the useful lives or the depreciation rates used;
(c) the gross carrying amount and the accumulated depreciation
(aggregated with accumulated impairment losses) at the beginning
and end of the period;
(d) a reconciliation of the carrying amount of investment property at
the beginning and end of the period, showing the following:
(i) additions, disclosing separately those additions resulting
from acquisitions and those resulting from subsequent
expenditure recognised as an asset;
(ii) additions resulting from acquisitions through business
combinations;
(iii) assets classified as held for sale or included in a disposal
group classified as held for sale in accordance with IFRS 5
and other disposals;
(iv) depreciation;
(v) the amount of impairment losses recognised, and the
amount of impairment losses reversed, during the period in
accordance with IAS 36;
(vi) the net exchange differences arising on the translation of the
financial statements into a different presentation currency,
and on translation of a foreign operation into the
presentation currency of the reporting entity;
(vii) transfers to and from inventories and owner-occupied
property; and
(viii) other changes.
(e) the fair value of investment property. In the exceptional cases
described in paragraph 53, when an entity cannot measure the fair
value of the investment property reliably, it shall disclose:
(i) a description of the investment property;

(ii) an explanation of why fair value cannot be measured
reliably; and
(iii) if possible, the range of estimates within which fair value is
highly likely to lie.

Transitional provisions
Fair value model

An entity that has previously applied IAS 40 (2000) and elects for the first
time to classify and account for some or all eligible property interests held
under operating leases as investment property shall recognise the effect of
that election as an adjustment to the opening balance of retained earnings
for the period in which the election is first made. In addition:
(a) if the entity has previously disclosed publicly (in financial
statements or otherwise) the fair value of those property interests in
earlier periods (measured on a basis that satisfies the definition of
fair value in IFRS 13), the entity is encouraged, but not required:
(i) to adjust the opening balance of retained earnings for the
earliest period presented for which such fair value was
disclosed publicly; and
(ii) to restate comparative information for those periods; and
(b) if the entity has not previously disclosed publicly the information
described in (a), it shall not restate comparative information and
shall disclose that fact.
This Standard requires a treatment different from that required by IAS 8.
IAS 8 requires comparative information to be restated unless such restatement
is impracticable.
When an entity first applies this Standard, the adjustment to the opening
balance of retained earnings includes the reclassification of any amount held
in revaluation surplus for investment property.

Cost model

IAS 8 applies to any change in accounting policies that is made when an entity
first applies this Standard and chooses to use the cost model. The effect of the
change in accounting policies includes the reclassification of any amount held
in revaluation surplus for investment property.
The requirements of paragraphs 27–29 regarding the initial measurement
of an investment property acquired in an exchange of assets transaction
shall be applied prospectively only to future transactions.

Business Combinations

Annual Improvements Cycle 2011–2013 issued in December 2013 added
paragraph 14A and a heading before paragraph 6. An entity shall apply that
amendment prospectively for acquisitions of investment property from the
beginning of the first period for which it adopts that amendment.
Consequently, accounting for acquisitions of investment property in prior
periods shall not be adjusted. However, an entity may choose to apply the
amendment to individual acquisitions of investment property that
occurred prior to the beginning of the first annual period occurring on or
after the effective date if, and only if, information needed to apply the
amendment to those earlier transactions is available to the entity.

IFRS 16

An entity applying IFRS 16, and its related amendments to this Standard,
for the first time shall apply the transition requirements in Appendix C of
IFRS 16 to its investment property held as a right-of-use asset.

Transfers of investment property

Transfers of Investment Property (Amendments to IAS 40), issued in December
2016, amended paragraphs 57–58. An entity shall apply those amendments to
changes in use that occur on or after the beginning of the annual reporting
period in which the entity first applies the amendments (the date of initial
application). At the date of initial application, an entity shall reassess the
classification of property held at that date and, if applicable, reclassify
property applying paragraphs 7–14 to reflect the conditions that exist at that
date.
Notwithstanding the requirements in paragraph 84C, an entity is permitted to
apply the amendments to paragraphs 57–58 retrospectively in accordance
with IAS 8 if, and only if, that is possible without the use of hindsight.
If, in accordance with paragraph 84C, an entity reclassifies property at the
date of initial application, the entity shall:
(a) account for the reclassification applying the requirements in
paragraphs 59–64. In applying paragraphs 59–64, an entity shall:
(i) read any reference to the date of change in use as the date of
initial application; and
(ii) recognise any amount that, in accordance with paragraphs
59–64, would have been recognised in profit or loss as an
adjustment to the opening balance of retained earnings at the
date of initial application.

(b) disclose the amounts reclassified to, or from, investment property in
accordance with paragraph 84C. The entity shall disclose those
amounts reclassified as part of the reconciliation of the carrying
amount of investment property at the beginning and end of the period
as required by paragraphs 76 and 79.

Effective date

An entity shall apply this Standard for annual periods beginning on or after
1 January 2005. Earlier application is encouraged. If an entity applies this
Standard for a period beginning before 1 January 2005, it shall disclose that
fact.
IAS 1 Presentation of Financial Statements (as revised in 2007) amended the
terminology used throughout IFRSs. In addition it amended paragraph 62. An
entity shall apply those amendments for annual periods beginning on or after
1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period,
the amendments shall be applied for that earlier period.
Paragraphs 8, 9, 48, 53, 54 and 57 were amended, paragraph 22 was deleted
and paragraphs 53A and 53B were added by Improvements to IFRSs issued in May
2008. An entity shall apply those amendments prospectively for annual
periods beginning on or after 1 January 2009. An entity is permitted to apply
the amendments to investment property under construction from any date
before 1 January 2009 provided that the fair values of investment properties
under construction were measured at those dates. Earlier application is
permitted. If an entity applies the amendments for an earlier period it shall
disclose that fact and at the same time apply the amendments to paragraphs 5
and 81E of IAS 16 Property, Plant and Equipment.
IFRS 13, issued in May 2011, amended the definition of fair value in
paragraph 5, amended paragraphs 26, 29, 32, 40, 48, 53, 53B, 78–80 and 85B
and deleted paragraphs 36–39, 42–47, 49, 51 and 75(d). An entity shall apply
those amendments when it applies IFRS 13.
Annual Improvements Cycle 2011–2013 issued in December 2013 added headings
before paragraph 6 and after paragraph 84 and added paragraphs
14A and 84A. An entity shall apply those amendments for annual periods
beginning on or after 1 July 2014. Earlier application is permitted. If an entity
applies those amendments for an earlier period it shall disclose that fact.
IFRS 15 Revenue from Contracts with Customers, issued in May 2014,
amended paragraphs 3(b), 9, 67 and 70. An entity shall apply those
amendments when it applies IFRS 15.
IFRS 16, issued in January 2016, amended the scope of IAS 40 by defining
investment property to include both owned investment property and property
held by a lessee as a right-of-use asset. IFRS 16 amended paragraphs 5, 7, 8, 9,
16, 20, 30, 41, 50, 53, 53A, 54, 56, 60, 61, 62, 67, 69, 74, 75, 77 and 78,
added paragraphs 19A, 29A, 40A and 84B and its related heading and deleted
paragraphs 3, 6, 25, 26 and 34. An entity shall apply those amendments when
it applies IFRS 16.
Transfers of Investment Property (Amendments to IAS 40), issued in December
2016, amended paragraphs 57–58 and added paragraphs 84C–84E. An entity
shall apply those amendments for annual periods beginning on or after
1 January 2018. Earlier application is permitted. If an entity applies those
amendments for an earlier period, it shall disclose that fact.

IFRS 17, issued in May 2017, amended paragraph 32B. An entity shall apply
that amendment when it applies IFRS 17.

Withdrawal of IAS 40 (2000)

This Standard supersedes IAS 40 Investment Property (issued in 2000).

Approval by the Board of IAS 40 issued in December 2003

International Accounting Standard 40 Investment Property (as revised in 2003) was
approved for issue by the fourteen members of the International Accounting Standards
Board.
Sir David Tweedie Chairman
Thomas E Jones Vice-Chairman
Mary E Barth
Hans-Georg Bruns
Anthony T Cope
Robert P Garnett
Gilbert Gélard
James J Leisenring
Warren J McGregor
Patricia L O’Malley
Harry K Schmid
John T Smith
Geoffrey Whittington
Tatsumi Yamada

Approval by the Board of Transfers of Investment Property
(Amendments to IAS 40) issued in December 2016

Transfers of Investment Property (Amendments to IAS 40) was approved for issue by all
12 members of the International Accounting Standards Board.
Hans Hoogervorst Chairman
Suzanne Lloyd Vice-Chair
Stephen Cooper
Philippe Danjou
Martin Edelmann
Amaro Gomes
Gary Kabureck
Takatsugu Ochi
Darrel Scott
Chungwoo Suh
Mary Tokar
Wei-Guo Zhang