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    Chapter 9 Investment Property

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    maria isabella
    Investment property is land and buildings held to earn rentals or for capital appreciation rather than for use in operations. It is initially measured at cost and subsequently at cost less depreciation and impairment. Transfers to or from investment property occur only if use changes, and are accounted for at cost with no resulting gain or loss. Impairment loss is recognized if carrying amount exceeds recoverable amount, which is the higher of fair value less costs to sell or value in use.

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    Chapter 9 Investment Property

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    maria isabella
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    Investment property is land and buildings held to earn rentals or for capital appreciation rather than for use in operations. It is initially measured at cost and subsequently at cost less depreciation and impairment. Transfers to or from investment property occur only if use changes, and are accounted for at cost with no resulting gain or loss. Impairment loss is recognized if carrying amount exceeds recoverable amount, which is the higher of fair value less costs to sell or value in use.

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    Millan 2020

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    Investment property is land and buildings held to earn rentals or for capital appreciation rather than for use in operations. It is initially measured at cost and subsequently at cost less depreciation and impairment. Transfers to or from investment property occur only if use changes, and are accounted for at cost with no resulting gain or loss. Impairment loss is recognized if carrying amount exceeds recoverable amount, which is the higher of fair value less costs to sell or value in use.

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    © All Rights Reserved
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    1K views4 pages

    Chapter 9 Investment Property

    Uploaded by

    maria isabella
    Investment property is land and buildings held to earn rentals or for capital appreciation rather than for use in operations. It is initially measured at cost and subsequently at cost less depreciation and impairment. Transfers to or from investment property occur only if use changes, and are accounted for at cost with no resulting gain or loss. Impairment loss is recognized if carrying amount exceeds recoverable amount, which is the higher of fair value less costs to sell or value in use.

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    Chapter 9 Investment Property

    Introduction
     Investment Property – is land and/or building held for rentals or capital
    appreciation. It is not held for use in the production or supply of goods or
    services, for administrative purposes, or sale in the ordinary course of business. 
    Examples of investment property:
    a. Land held for long-term capital appreciation rather than for short-term sale in the
    ordinary course of operations;
    b. Land held for a currently undetermined future use;
    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 on a commercial basis;
    d. A building that is vacant but is held to be leased out under one or more operating
    leases on a commercial basis to external parties;
    e. Property that is being constructed or developed for future use as investment
    property; and
    f. Significant portion of a property that is held to earn rentals or for capital
    appreciation rather than to provide services, and insignificant portion that is held
    for use in the production or supply of goods or services or for administrative
    purposes. (GAM for NGAs, Chapter 9, Sec. 3) 

    The following are items not considered as investment property:


    a. Biological assets related to agricultural activity;
    b. Mineral rights and mineral reserves such as oil, natural gas and similar non-
    regenerative resources;
    c. Property held for sale in the ordinary course of operations or in the process of
    construction or development for such sale;
    d. Property being constructed or developed on behalf of third parties;
    e. Owner-occupied property, including: 
    i. Property held for future use as owner-occupied property;
    ii. Property held for future development and subsequent use as owner-
    occupied property;
    iii. Property occupied by employees; or 
    iv. Owner-occupied property awaiting disposal.
    f. Property that is leased to another entity under a finance lease;
    g. Property held to provide a social service and which also generates cash inflows;
    h. Property held for strategic purposes; and,
    i. Property held for use in the production or supply of goods or services or for
    administrative purposes. (GAM for NGAs, Chapter 9, Sec. 4) 

    Initial Measurement
    An investment property is initially measured at cost. The measurement of cost depends
    on the mode of acquisition. 

    Modes of Acquisition
    1. Cash purchase - the cost of an investment property acquired through cash
    purchase comprises the purchase price and any direct costs necessary in
    bringing the asset to its intended condition, e.g., professional fees for legal
    services and property transfer taxes. 
    2. Installment purchase - the cost of an investment property acquired through
    installment purchase is the cash price equivalent. The difference between this
    amount and the total payments is recognized as interest expense over the
    period of credit. 
    3. Non-exchange transaction – the cost of an investment property acquired
    through a non-exchange transaction is the fair value at the acquisition date. 
    4. Self-construction - the cost of a self-constructed investment property includes
    the costs of direct materials, labor, and construction overhead. The cost of
    wasted materials, labor or other resources incurred in constructing the property
    are recognized as expense. 
     Construction costs incurred are initially recorded in the "Construction in
    Progress" account pending the completion of the investment property. Upon
    completion, the construction costs are reclassified to the "Investment Property"
    account.
    The cost of an investment property does not include the following: 
    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 materials, labor or other resources incurred in
    constructing or developing the property. 

    Subsequent Measurement
    Investment properties are subsequently measured under the cost model. Under this
    model, investment properties are measured at cost less accumulated depreciation and
    accumulated impairment losses. 

    The fair value model, which is available to business entities, is not allowed for
    government entities. 

    Transfers To or From Investment Property


    Transfers to or from investment property shall be made only when there is a change in
    use, as evidenced by the following:
    a. Commencement of owner-occupation, for a transfer from investment property to
    owner-occupied property;
    b. End of owner-occupation, for a transfer from owner-occupied property to
    investment property;
    c. Commencement of an operating lease (on a commercial basis) to another party,
    for a transfer from inventories to investment property; or
    d. Commencement of development with a view to sale, for a transfer from
    investment property to inventories. 
    A government entity accounts for transfers to or from investment property at cost.
    Accordingly, no gain or loss shall arise from the transfer, except when the transferred
    asset is impaired, in which case, impairment loss shall be recognized first before
    making the reclassification. 

    Derecognition
    An investment property is derecognized when it is disposed or when it is
    permanently withdrawn from use and no future economic benefits or service potential is
    expected from its disposal. 

    When an investment property is derecognized, the difference between the net


    disposal proceeds (if any) and its carrying amount is recognized as gain or loss in
    surplus or deficit. 

    Impairment
    An asset is impaired if its carrying amount exceeds its recoverable amount. The
    excess represents impairment loss which shall be recognized in surplus or deficit. 
     Recoverable amount is the higher of an asset's fair value less costs to sell and
    value in use.
     Value in use is the present value of the estimated future cash flows expected to
    be derived from the continuing use of an asset and from its disposal at the end of
    its useful life. 
    The reversal of impairment shall not result to a carrying amount in excess of the
    asset's carrying amount had no impairment loss been recognized in prior periods. 

    The reversal of impairment is recognized in surplus or deficit in the period of


    reversal. 
    Compensation from third parties Compensation from third parties for an investment
    property that was impaired, lost or given up shall be recognized in surplus or deficit
    when the compensation becomes receivable. 

    Chapter 9 Summary: 
     Investment Property is land and/or building held for rentals or capital
    appreciation.
     Investment property is initially measured at cost and subsequently measured at
    cost less accumulated depreciation and impairment losses. The fair value model
    is not allowed for government entities.
     Transfers to or from investment property shall be made only when there is a
    change in use. A government entity accounts for transfers to or from investment
    property at cost. Accordingly, no gain or loss shall arise from the transfer, except
    when the transferred asset is impaired.
     On derecognition of an investment property, the difference between the net
    disposal proceeds (if any) and the carrying amount is recognized as gain or loss
    in surplus or deficit.
     An asset is impaired if its carrying amount exceeds its recoverable amount.
    Recoverable amount is the higher of an asset's fair value less costs to sell and
    value in use.
     The reversal of impairment shall not result to a carrying amount in excess of the
    asset's carrying amount had no impairment loss been recognized in prior
    periods. 

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