How Well Do You Know IAS 40 Investment Property?

Investment property is defined as a property that is held for capital appreciation or to earn rentals. It is not defined as a property used in the production or supply of goods or services. This means that if a property is used for business purposes, such as a factory or office space, it would not be considered investment property. Instead, it would fall under a different category, such as property, plant, and equipment.

This is a property held for sale in the ordinary course of business and is not an investment property.

This is land held for long term capital appreciation and therefore is an investment property. The lack of planning permission is not relevant as values can appreciate in the absence of permission to build.

All of the given assets can be classified as investment properties. A building that is leased to generate rental income qualifies as an investment property. An unoccupied building that is held for capital appreciation or future use as an investment also falls under this category. Similarly, land held for long-term appreciation or for generating rental income is considered an investment property. Therefore, all three options mentioned - building leased, unoccupied building, and land - can be classified as investment properties.

The correct answer is IAS 40 and IFRS 16. These are the standards that provide guidance on how to account for investment properties. IAS 40 specifically deals with the measurement, recognition, and presentation of investment properties, while IFRS 16 provides guidance on lease accounting, which is relevant for investment properties that are leased. Therefore, these two standards are the appropriate standards to refer to when accounting for investment properties.

IAS 40 para 79(e)

IAS 40 paras 8 and 9

An investment property should be measured at its cost because this is the initial amount paid to acquire the property. Cost includes the purchase price, transaction costs, and any other directly attributable costs. Fair value and deemed cost are not appropriate measurements for investment properties as they are typically used for other types of assets.

When an undertaking decides to dispose of an investment property without development, it continues to treat the property as an investment property. This means that the undertaking will still recognize the property as an investment and account for it accordingly, rather than reclassifying it as owner-occupied or transferring it to inventory.

IAS 40 para 76