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TMI BlogInvestment PropertyX X X X Extracts X X X X X X X X Extracts X X X X ..... ideration 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 Ind ASs, eg Ind AS 102, 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 Ind AS 113, Fair Value Measurement). 17[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 6 [Refer Appendix 1] 18[7 Investment property is held to earn rentals or for capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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. 11 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. 12 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. 13 It may be difficult to determine whether ancillary services are so significant that a property does not qualify as investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y; and (b) the cost of the investment property can be measured reliably.] 17 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. 18 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-today 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. 19 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 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. 29 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 the fair value of that investment property either when 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cost model in all other cases.] Transfers 8[57 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) Omitted*;] 9[58 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 balance sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanges 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 Ind AS 115.] 71 An entity applies Ind AS 37 or other Standards, as appropriate, to any liabilities that it retains after disposal of an investment property. 72 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. 73 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 Ind AS 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 constructe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ind AS 105 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 Ind AS 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and deleted paragraphs 3, 25 and 26. An entity shall apply those amendments when it applies Ind AS 116.] 85G Transfers of Investment Property (Amendments to Ind AS 40), amended paragraphs 57-58 and added paragraphs 84C-84E. An entity shall apply those amendments for annual periods beginning on or after 1st April, 2018.] Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 40 and the corresponding International Accounting Standard (IAS) 40, Investment Property, issued by the International Accounting Standards Board. Comparison with IAS 40, Investment Property 33[1 IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40 permits only the cost model. The following paragraphs of IAS 40 which deal with fair value model have been deleted in Ind AS 40. In order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40: (i) Paragraph 31 (ii) Paragraphs 32A-32C (iii) Paragraphs 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 as all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards. Paragraphs 85 to 85D in IAS 40 have not been included in Ind AS 40 as these paragraphs relate to effective date which are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40. 34[****]] ******************** Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " (b) recognition of lease income from investment property (see also Ind AS 115, Revenue from Contracts with Customers); " 2. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " (b) [Refer Appendix 1] " 3. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, " 67 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 is the date the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, evidenced by commencement of development with a view to sale. 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 balance sheet) and does not treat 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." 10. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "3[ 67 The disposal of an investment property may be achieved by sale or by entering into a finance lease. In determining the date of disposal for investment property, an entity applies the criteria in Ind AS 18 for recognising revenue from the sale of goods. Ind AS 17 applies to a disposal effected by entering into a finance lease and to a sale and leaseback. ]" 11. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, "4[70 The consideration r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Owner-occupied property is property held (by the owner or by the lessee under a finance lease) for use in the production or supply of goods or services or for administrative purposes. " 18. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "7 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. Ind AS 16 applies to owner-occupied property." 19. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "(c) a building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases." 20. Substituted vide NOTIFICA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognition purposes." 25. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 26. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 27. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "56 After initial recognition, an entity shall measure all of its investment properties in accordance with Ind AS 16's requirements for cost model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. Investment properties that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) shall be measured in accordance with Ind AS 105. " 28. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "10[67 The disposal of an investment property may be achieved by sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paragraphs 60-65 (ix) Paragraph 75(b) (x) Paragraph 75(f)(iv) (xi) Paragraphs 76-78 13[(xii) Paragraphs 84E(i) - (ii)]" 34. Omitted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "4 IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied. In such cases, the operating lease would be accounted as if it were a finance lease. Since Ind AS 40 prohibits the use of fair value model, this treatment is prohibited in Ind AS 40. As a result, paragraph 6 of IAS 40 has been deleted in Ind AS 40 (see point 1(i) above). In addition, the expression 'investment property under a finance or operating lease' appearing in paragraph 74 of IAS 40 has been modified as 'investment property under a finance lease' in Ind AS 40. 9. In IAS 40, paragraphs 84B and 85F are added consequent to the issuance of new standard on leases (IFRS 16, Leases). Ind AS corresponding to IFRS 16 is under formulation in India. Accordingly, these paragraphs will be finalised once Ind AS 116 is finalised." 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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