INVESTMENT PROPERTY

Only LAND and BUILDING can qualify as investment property.

An equipment or ANY movable property cannot qualify as investment
property.
Investment property is held to earn rentals and/or for capital
appreciation.
An investment property generates cash flows that are largely independent
of the other assets of the entity.
Owner-occupied property the property held by an owner or by the lessee under
a finance lease for use in the production or supply of goods or services or for
administrative purposes. (or simply, PPE)
Where a property held under a lease is classified as an investment property,
the initial cost is the LOWER of the fair value and the present value of the
minimum lease payments.
All property classified as investment property is to be accounted for
consistently. ( fair value model or cost model)
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 credit period.
If the fair value of the asset received or the asset given up cannot be
measured reliably, the cost is equal to the carrying amount of the asset
given up.
If an enterprise chooses to present its property held under operating lease
as investment property, the enterprise may only use the fair value model to
measure all its investment property.
EXAMPLES OF INVESTMENT PROPERTY:
Land held for long term capital appreciation.
Land held for a currently undetermined use.
Building owned or held by the entity under a finance lease, and leased
out under an operating lease.
Building that is vacant but is held to be leased out under an operating
lease.
ITEMS NOT CONSIDERED AS INVESTMENT PROPERTY:
Property that is leased to another entity under a finance lease.
Owner-occupied property
Property occupied by employees
Property being constructed or developed on behalf of third parties.
MODELS:
1 FAIR VALUE MODEL
- Any changes in fair value are included in the net income (loss) of the
period in which they arise.
- NO depreciation is recorded for the investment property.

COST MODEL
- Fair value of the investment property shall be disclosed.
- Fluctuations in the fair value of the investment property from year to year
are not recognized.

In determining the fair value of the investment property, transaction costs

that may be incurred on sale or other disposal costs are not deducted.
Under such exceptional cases where the fair value of the investment property
cannot be determined reliably on a continuing basis, the entity shall
measure such investment property using the cost model until the disposal of
the investment property and the salvage value is assumed to be zero.
An entity that uses the FV model shall continue to measure its other IP at FV,
notwithstanding the fact that one IP is carried using the cost model due to
exceptional cases.
TRANSFERS OF INVESTMENT PROPERTY
1 Under COST MODEL
o Investment property PPE (or PPE Investment property) ; reclassify
only the updated carrying amount. No Gain or loss recognized.
2 Under FAIR VALUE MODEL
o Investment property PPE/inventory ; reclassify at fair value as
of reclassification date. Any Gain or loss recognized will go to profit or
loss.
o PPE investment property; the excess of fair value over the
carrying value shall be taken to Revaluation surplus. [if FV > CV,
Revaluation surplus ; if FV < CV, empty first the balance of RS and if
there is excess, charge it Revaluation loss (which is a P/L account)]
o Inventory investment property ; the difference between the fair
value and the carrying amount shall be included in profit or loss.
o Investment property under construction completed; the difference
between the fair value and the carrying amount shall be included in
profit or loss.
Gain or loss on disposal of investment property = net disposal proceeds
carrying amount.
G/L on disposal of investment property P/L