IAS – 40 Investment Property
As Real estate sector industry is increasing day by day in United Arab Emirates there is great demand of application of IAS-40 as it accounts for the investment property held for rentals or capital appreciation.
Investment property is land or a building (including part of a building) or both that is:
- held to earn rentals or for capital appreciation
- not owner-occupied
- not used in production or supply of goods and services or for administration
- not held for sale in the ordinary course of business.
Investment property may include investment property that is being recreated. An investment property is measured initially at cost. The cost of an investment property held under a lease is measured in accordance with IFRS-16.
For subsequent measurement the investment properties must be either held at fair value or at cost. If company policy is to measure the buildings on fair value than all the building must be measured on the fair value and vice versa. Fair value reflects market conditions at the end of the reporting period.
Under the fair value model, investment property is remeasured at the end of each year end. Changes in fair value are recognised in profit or loss. Fair value is the price at which it can be exchange to another part at arm’s length transaction without deducting the transaction cost.
Under the cost model, investment property is measured at cost less accumulated depreciation and any accumulated impairment losses. Gains and losses on disposal are recognised in profit or loss.