INTERNATIONAL PUBLIC SECTOR

ACCOUNTING STANDARDS

IPSAS 16—INVESTMENT PROPERTY
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 IPSAS 16—INVESTMENT PROPERTY
Acknowledgment
This International Public Sector Accounting Standard (IPSAS) is drawn primarily
from International Accounting Standard (IAS) 40 (Revised 2003), Investment
Property, published by the International Accounting Standards Board (IASB).
Extracts from IAS 40 are reproduced in this publication of the International Public
Sector Accounting Standards Board (IPSASB) of the International Federation of
Accountants (IFAC) with the permission of the International Financial Reporting
Standards (IFRS) Foundation.
The approved text of the International Financial Reporting Standards (IFRSs) is
that published by the IASB in the English language, and copies may be obtained
directly from IFRS Publications Department, First Floor, 30 Cannon Street, London
EC4M 6XH, United Kingdom.
E-mail: [email protected]
Internet: www.ifrs.org
IFRSs, IASs, Exposure Drafts, and other publications of the IASB are copyright of
the IFRS Foundation.
“IFRS,” “IAS,” “IASB,” “IFRS Foundation,” “International Accounting
Standards,” and “International Financial Reporting Standards” are trademarks of
the IFRS Foundation and should not be used without the approval of the IFRS
Foundation.

IPSAS 16 466
 IPSAS 16—INVESTMENT PROPERTY
History of IPSAS
This version includes amendments resulting from IPSASs issued up to
January 31, 2018.
IPSAS 16, Investment Property was issued in December 2001.
In December 2006 the IPSASB issued a revised IPSAS 16.
Since then, IPSAS 16 has been amended by the following IPSASs:
●● IPSAS 40, Public Sector Combinations (issued January 2017)
●● The Applicability of IPSASs (issued April 2016)
●● Improvements to IPSASs 2015 (issued April 2016)
●● IPSAS 33, First-time Adoption of Accrual Basis International Public Sector
Accounting Standards (IPSASs) (issued January 2015)
●● Improvements to IPSASs 2011 (issued October 2011)
●● Improvements to IPSASs (issued January 2010)
●● IPSAS 27, Agriculture (issued December 2009)

Table of Amended Paragraphs in IPSAS 16

Paragraph Affected How Affected Affected By

Introduction section Deleted Improvements to IPSASs
October 2011
3 Deleted The Applicability of
IPSASs April 2016
4 Deleted The Applicability of
IPSASs April 2016
6 Amended IPSAS 27 December
2009
Improvements to IPSASs
April 2016
9 Amended The Applicability of
IPSASs April 2016
12 Amended Improvements to IPSASs
January 2010

467 IPSAS 16

 Paragraph Affected How Affected Affected By
13 Amended Improvements to IPSASs
January 2010
18A New IPSAS 40 January 2017
20 Amended Improvements to IPSASs
April 2016
29 Deleted Improvements to IPSASs
January 2010
40 Amended Improvements to IPSASs
January 2010
Improvements to IPSASs
April 2016
57 Amended Improvements to IPSASs
January 2010
59 Amended Improvements to IPSASs
January 2010
62 Amended Improvements to IPSASs
January 2010
62A New Improvements to IPSASs
January 2010
62B New Improvements to IPSASs
January 2010
63 Amended Improvements to IPSASs
January 2010
66 Amended Improvements to IPSASs
January 2010
87 Amended IPSAS 40 January 2017
90 Amended IPSAS 40 January 2017
91 Deleted IPSAS 33 January 2015
92 Deleted IPSAS 33 January 2015
93 Deleted IPSAS 33 January 2015
94 Deleted IPSAS 33 January 2015

IPSAS 16 468
 Paragraph Affected How Affected Affected By
95 Deleted IPSAS 33 January 2015
96 Deleted IPSAS 33 January 2015
98 Deleted IPSAS 33 January 2015
99 Deleted IPSAS 33 January 2015
101A New Improvements to IPSASs
January 2010
101B New IPSAS 33 January 2015
101C New Improvements to IPSASs
April 2016
101D New The Applicability of
IPSASs April 2016
101E New IPSAS 40 January 2017
102 Amended IPSAS 33 January 2015
Illustrative Decision Tree Amended Improvements to IPSASs
January 2010

469 IPSAS 16

 December 2006

IPSAS 16—INVESTMENT PROPERTY

CONTENTS
Paragraph
Objective....................................................................................................1
Scope..........................................................................................................2–6
Definitions..................................................................................................7–19
Property Interest Held by a Lessee under an Operating Lease...........8
Investment Property............................................................................9–19
Recognition................................................................................................20–25
Measurement at Recognition.....................................................................26–38
Measurement after Recognition.................................................................39–65
Accounting Policy..............................................................................39–41
Fair Value Model................................................................................42–64
Inability to Determine Fair Value Reliably..................................62–64
Cost Model..........................................................................................65
Transfers.....................................................................................................66–76
Disposals....................................................................................................77–84
Disclosure..................................................................................................85–90
Fair Value Model and Cost Model......................................................85–90
Fair Value Model.........................................................................87–89
Cost Model..................................................................................90
Transitional Provisions..............................................................................91–100
Initial Adoption of Accrual Accounting..............................................91–93
Fair Value Model................................................................................94–97
Cost Model..........................................................................................98–100
Effective Date............................................................................................101–102
Withdrawal of IPSAS 16 (2001)................................................................103

IPSAS 16 470
 INVESTMENT PROPERTY

Basis for Conclusions

Illustrative Decision Tree
Comparison with IAS 40

471 IPSAS 16

 INVESTMENT PROPERTY

International Public Sector Accounting Standard 16, Investment Property, is set

out in paragraphs 1–103. All the paragraphs have equal authority. IPSAS 16 should
be read in the context of its objective, the Basis for Conclusions, the Preface to
International Public Sector Accounting Standards, and the Conceptual Framework
for General Purpose Financial Reporting by Public Sector Entities. IPSAS 3,
Accounting Policies, Changes in Accounting Estimates and Errors, provides a basis
for selecting and applying accounting policies in the absence of explicit guidance.

IPSAS 16 472
 INVESTMENT PROPERTY

Objective
1. The objective of this Standard is to prescribe the accounting treatment for
investment property and related disclosure requirements.

Scope
2. An entity that prepares and presents financial statements under the
accrual basis of accounting shall apply this Standard in accounting for
investment property.
3. [Deleted]
4. [Deleted]
5. This Standard applies to accounting for investment property, including (a)
the measurement in a lessee’s financial statements of investment property
interests held under a lease accounted for as a finance lease, and to (b)
the measurement in a lessor’s financial statements of investment property
provided to a lessee under an operating lease. This Standard does not deal
with matters covered in IPSAS 13, Leases, including:
(a) Classification of leases as finance leases or operating leases;
(b) Recognition of lease revenue from investment property (see also
IPSAS 9, Revenue from Exchange Transactions);
(c) Measurement in a lessee’s financial statements of property interests
held under a lease accounted for as an operating lease;
(d) Measurement in a lessor’s financial statements of its net investment in
a finance lease;
(e) Accounting for sale and leaseback transactions; and
(f) Disclosure about finance leases and operating leases.
6. This Standard does not apply to:
(a) Biological assets related to agricultural activity (see IPSAS 27,
Agriculture and IPSAS 17, Property, Plant, and Equipment); and
(b) Mineral rights and mineral reserves such as oil, natural gas, and similar
non-regenerative resources.

Definitions
7. The following terms are used in this Standard with the meanings
specified:
Carrying amount (for the purpose of this Standard) is the amount at
which an asset is recognized in the statement of financial position.

473 IPSAS 16

 INVESTMENT PROPERTY

Cost is the amount of cash or cash equivalents paid or the fair value of
other consideration given to acquire an asset at the time of its acquisition
or construction.
Investment property is property (land or a building – or part of a
building – or both) held 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 operations.
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.
Terms defined in other IPSASs are used in this Standard with the same
meaning as in those Standards, and are reproduced in the Glossary of
Defined Terms published separately.

Property Interest Held by a Lessee under an Operating Lease

8. A property interest that is held by a lessee under an operating lease may be
classified and accounted for as investment property if, and only if, (a) the
property would otherwise meet the definition of an investment property,
and (b) the lessee uses the fair value model set out in paragraphs 42–64
for the asset recognized. This classification alternative is available on a
property-by-property basis. However, once this classification alternative
is selected for one such property interest held under an operating
lease, all property classified as investment property shall be accounted
for using the fair value model. When this classification alternative is
selected, any interest so classified is included in the disclosures required
by paragraphs 85–89.

Investment Property
9. There are a number of circumstances in which public sector entities may hold
property to earn rental and for capital appreciation. For example, a public
sector entity may be established to manage a government’s property portfolio
on a commercial basis. In this case, the property held by the entity, other
than property held for resale in the ordinary course of operations, meets the
definition of an investment property. Other public sector entities may also
hold property for rentals or capital appreciation, and use the cash generated
to finance their other (service delivery) activities. For example, a university
or local government may own a building for the purpose of leasing on a
commercial basis to external parties to generate funds, rather than to produce
or supply goods and services. This property would also meet the definition of
investment property.

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 INVESTMENT PROPERTY

10. Investment property is held to earn rentals or for capital appreciation, or both.
Therefore, investment property generates cash flows largely independently
of the other assets held by an entity. This distinguishes investment property
from other land or buildings controlled by public sector entities, including
owner-occupied property. The production or supply of goods or services (or
the use of property for administrative purposes) can also generate cash flows.
For example, public sector entities may use a building to provide goods and
services to recipients in return for full or partial cost recovery. However, the
building is held to facilitate the production of goods and services, and the
cash flows are attributable not only to the building, but also to other assets
used in the production or supply process. IPSAS 17, Property, Plant, and
Equipment, applies to owner-occupied property.
11. In some public sector jurisdictions, certain administrative arrangements exist
such that an entity may control an asset that may be legally owned by another
entity. For example, a government department may control and account for
certain buildings that are legally owned by the State. In such circumstances,
references to owner-occupied property means property occupied by the entity
that recognizes the property in its financial statements.
12. The following are examples of investment property:
(a) Land held for long-term capital appreciation rather than for short-term
sale in the ordinary course of operations. For example, land held by a
hospital for capital appreciation that may be sold at a beneficial time
in the future.
(b) Land held for a currently undetermined future use. (If an entity has
not determined that it will use the land as owner-occupied property,
including occupation to provide services such as those provided by
national parks to current and future generations, or for short-term sale
in the ordinary course of operations, the land is regarded as held for
capital appreciation).
(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. For example, a university may own a building that
it leases on a commercial basis to external parties.
(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.
13. The following are examples of items that are not investment property and are
therefore outside the scope of this Standard:

475 IPSAS 16

 INVESTMENT PROPERTY

(a) Property held for sale in the ordinary course of operations or in the
process of construction or development for such sale (see IPSAS 12,
Inventories). For example, a municipal government may routinely
supplement rate income by buying and selling property, in which case
property held exclusively with a view to subsequent disposal in the
near future or for development for resale is classified as inventory. A
housing department may routinely sell part of its housing stock in the
ordinary course of its operations as a result of changing demographics,
in which case any housing stock held for sale is classified as inventory.
(b) Property being constructed or developed on behalf of third parties.
For example, a property and service department may enter into
construction contracts with entities external to its government (see
IPSAS 11, Construction Contracts).
(c) Owner-occupied property (see IPSAS 17), including (among other
things) property held for future use as owner-occupied property,
property held for future development and subsequent use as owner-
occupied property, property occupied by employees such as housing
for military personnel (whether or not the employees pay rent at market
rates) and owner-occupied property awaiting disposal.
(d) [Deleted]
(e) Property that is leased to another entity under a finance lease.
(f) Property held to provide a social service and which also generates cash
inflows. For example, a housing department may hold a large housing
stock used to provide housing to low income families at below market
rental. In this situation, the property is held to provide housing services
rather than for rentals or capital appreciation and rental revenue
generated is incidental to the purposes for which the property is held.
Such property is not considered an “investment property” and would
be accounted for in accordance with IPSAS 17.
(g) Property held for strategic purposes which would be accounted for in
accordance with IPSAS 17.
14. In many jurisdictions, public sector entities will hold property to meet service
delivery objectives rather than to earn rental or for capital appreciation.
In such situations, the property will not meet the definition of investment
property. However, where a public sector entity does hold property to earn
rental or for capital appreciation, this Standard is applicable. In some cases,
public sector entities hold some property that comprises (a) a portion that is
held to earn rentals or for capital appreciation rather than to provide services,
and (b) another portion that is held for use in the production or supply of
goods or services or for administrative purposes. For example, a hospital
or a university may own a building, part of which is used for administrative

IPSAS 16 476
 INVESTMENT PROPERTY

purposes, and part of which is leased out as apartments on a commercial

basis. 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.
15. 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
a government agency (a) owns an office building that is held exclusively
for rental purposes and rented on a commercial basis, and (b) also provides
security and maintenance services to the lessees who occupy the building.
16. In other cases, the services provided are significant. For example, a
government may own a hotel or hostel that it manages through its general
property management agency. The services provided to guests are significant
to the arrangement as a whole. Therefore, an owner-managed hotel or hostel
is owner-occupied property, rather than investment property.
17. It may be difficult to determine whether ancillary services are so significant
that a property does not qualify as investment property. For example, a
government or government agency that is the owner of a hotel may transfer
some responsibilities to third parties under a management contract. The terms
of such management contracts vary widely. At one end of the spectrum, the
government’s or government agency’s position may, in substance, be that
of a passive investor. At the other end of the spectrum, the government or
government agency may simply have outsourced day-to-day functions, while
retaining significant exposure to variation in the cash flows generated by the
operations of the hotel.
18. Judgment is needed to determine whether a property qualifies as investment
property. An entity develops criteria so that it can exercise that judgment
consistently in accordance with the definition of investment property, and
with the related guidance in paragraphs 9–17. Paragraph 86(c) requires an
entity to disclose these criteria when classification is difficult.
18A. Judgment is also needed to determine whether the acquisition of investment
property is the acquisition of an asset or a group of assets or a public sector
combination within the scope of IPSAS 40, Public Sector Combinations.
Reference should be made to IPSAS 40 to determine whether it is a public
sector combination. The discussion in paragraphs 9–18 of this Standard
relates to whether or not property is owner-occupied property or investment
property and not to determining whether or not the acquisition of property is
a public sector combination as defined in IPSAS 40. Determining whether
a specific transaction meets the definition of a public sector combination as

477 IPSAS 16

 INVESTMENT PROPERTY

defined in IPSAS 40 and includes an investment property as defined in this

Standard requires the separate application of both Standards.
19. In some cases, an entity owns property that is leased to, and occupied by,
its controlling entity or another controlled entity. The property does not
qualify as investment property in consolidated financial statements, because
the property is owner-occupied from the perspective of the economic entity.
However, from the perspective of the entity that owns it, the property is
investment property if it meets the definition in paragraph 7. Therefore, the
lessor treats the property as investment property in its individual financial
statements. This situation may arise where a government establishes a property
management entity to manage government office buildings. The buildings
are then leased out to other government entities on a commercial basis. In
the financial statements of the property management entity, the property
would be accounted for as investment property. However, in the consolidated
financial statements of the government, the property would be accounted for
as property, plant, and equipment in accordance with IPSAS 17.

Recognition
20. Investment property shall be recognized as an asset when, and only
when:
(a) It is probable that the future economic benefits or service potential
that are associated with the investment property will flow to the
entity; and
(b) The cost or fair value of the investment property can be measured
reliably1.
21. In determining whether an item satisfies the first criterion for recognition, an
entity needs to assess the degree of certainty attaching to the flow of future
economic benefits or service potential on the basis of the available evidence at
the time of initial recognition. Existence of sufficient certainty that the future
economic benefits or service potential will flow to the entity necessitates an
assurance that the entity will receive the rewards attaching to the asset, and
will undertake the associated risks. This assurance is usually only available
when the risks and rewards have passed to the entity. Before this occurs, the
transaction to acquire the asset can usually be cancelled without significant
penalty and, therefore, the asset is not recognized.
22. The second criterion for recognition is usually readily satisfied because the
exchange transaction evidencing the purchase of the asset identifies its cost.

1
Information that is reliable is free from material error and bias, and can be depended on by users to
faithfully represent that which it purports to represent or could reasonably be expected to represent.
Paragraph BC16 of IPSAS 1 discusses the transitional approach to the explanation of reliability.

IPSAS 16 478
 INVESTMENT PROPERTY

As specified in paragraph 27 of this Standard, under certain circumstances an

investment property may be acquired at no cost or for a nominal cost. In such
cases, cost is the investment property’s fair value as at the date of acquisition.
23. 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.
24. Under the recognition principle in paragraph 20, an entity does not recognize
in the carrying amount of an investment property the costs of the day-to-day
servicing of such a property. Rather, these costs are recognized in surplus or
deficit as incurred. Costs of day-to-day servicing are primarily the costs of
labor 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.
25. Parts of investment property may have been acquired through replacement.
For example, the interior walls may be replacements of original walls. Under
the recognition principle, an entity recognizes 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 recognition criteria are met.
The carrying amount of those parts that are replaced is derecognized in
accordance with the derecognition provisions of this Standard.

Measurement at Recognition
26. Investment property shall be measured initially at its cost (transaction
costs shall be included in this initial measurement).
27. Where an investment property is acquired through a non-exchange
transaction, its cost shall be measured at its fair value as at the date of
acquisition.
28. The cost of a purchased investment property comprises its purchase price
and any directly attributable expenditure. Directly attributable expenditure
includes, for example, professional fees for legal services, property transfer
taxes, and other transaction costs.
29. [Deleted]
30. The cost of investment property is not increased by:
(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

479 IPSAS 16

 INVESTMENT PROPERTY

(c) Abnormal amounts of wasted material, labor or other resources

incurred in constructing or developing the property.
31. If payment for 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 period of credit.
32. An investment property may be acquired through a non-exchange transaction.
For example, a national government may transfer at no charge a surplus
office building to a local government entity, which then lets it out at market
rent. An investment property may also be acquired through a non-exchange
transaction by the exercise of powers of sequestration. In these circumstances,
the cost of the property is its fair value as at the date it is acquired.
33. Where an entity initially recognizes its investment property at fair value in
accordance with paragraph 27, the fair value is the cost of the property. The
entity shall decide, subsequent to initial recognition, to adopt either the fair
value model (paragraphs 42–64) or the cost model (paragraph 65).
34. The initial cost of a property interest held under a lease and classified
as an investment property shall be as prescribed for a finance lease by
paragraph 28 of IPSAS 13, i.e., the asset shall be recognized at the lower
of the fair value of the property and the present value of the minimum
lease payments. An equivalent amount shall be recognized as a liability
in accordance with that same paragraph.
35. Any premium paid for a lease is treated as part of the minimum lease
payments for this purpose, and is therefore included in the cost of the asset,
but is excluded from the liability. If a property interest held under a lease
is classified as investment property, the item accounted for at fair value
is that interest and not the underlying property. Guidance on determining
the fair value of a property interest is set out for the fair value model in
paragraphs 42–61. That guidance is also relevant to the determination of fair
value when that value is used as cost for initial recognition purposes.
36. One or more investment properties may be acquired in exchange for a non-
monetary asset or assets, or a combination of monetary and non-monetary
assets. The following discussion refers to an exchange of one non-monetary
asset for another, but it also applies to all exchanges described in the
preceding sentence. The cost of such an investment property is measured at
fair value unless (a) the exchange transaction lacks commercial substance or
(b) the fair value of neither the asset received nor the asset given up is reliably
measurable. The acquired asset is measured in this way even if an entity
cannot immediately derecognize the asset given up. If the acquired asset is
not measured at fair value, its cost is measured at the carrying amount of the
asset given up.

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37. An entity determines whether an exchange transaction has commercial

substance by considering the extent to which its future cash flows or service
potential is expected to change as a result of the transaction. An exchange
transaction has commercial substance if:
(a) The configuration (risk, timing, and amount) of the cash flows or
service potential of the asset received differs from the configuration of
the cash flows or service potential 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, if tax
applies. The result of these analyses may be clear without an entity having to
perform detailed calculations.
38. The fair value of an asset for which comparable market transactions do not
exist is reliably measurable if (a) the variability in the range of reasonable
fair value estimates is not significant for that asset or (b) the probabilities of
the various estimates within the range can be reasonably assessed and used
in estimating fair value. If the entity is able to determine reliably the fair
value of either the asset received or the asset given up, then the fair value of
the asset given up is used to measure cost unless the fair value of the asset
received is more clearly evident.

Measurement after Recognition

Accounting Policy
39. With the exception noted in paragraph 43, an entity shall choose as its
accounting policy either the fair value model in paragraphs  42–64 or
the cost model in paragraph 65, and shall apply that policy to all of its
investment property.
40. IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors
states that a voluntary change in accounting policy shall be made only if the
change results in the financial statements providing faithfully representative
and more relevant information about the effects of transactions, other events
or conditions on the entity’s financial position, financial performance or cash
flows. It is highly unlikely that a change from the fair value model to the cost
model will result in a more relevant presentation.
41. This Standard requires all entities to determine the fair value of investment
property, for the purpose of either measurement (if the entity uses the fair

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 INVESTMENT PROPERTY

value model) or disclosure (if it uses the cost model). An entity is encouraged,
but not required, to determine the fair value of investment property on the
basis of a valuation by an independent valuer who holds a recognized and
relevant professional qualification and has recent experience in the location
and category of the investment property being valued.

Fair Value Model

42. After initial recognition, an entity that chooses the fair value model shall
measure all of its investment property at fair value, except in the cases
described in paragraph 62.
43. When a property interest held by a lessee under an operating lease is
classified as an investment property under paragraph 8, paragraph 39 is
not elective; the fair value model shall be applied.
44. A gain or loss arising from a change in the fair value of investment
property shall be recognized in surplus or deficit for the period in which
it arises.
45. The fair value of investment property is the price at which the property could
be exchanged between knowledgeable, willing parties in an arm’s length
transaction (see paragraph 7). Fair value specifically excludes an estimated
price inflated or deflated by special terms or circumstances such as atypical
financing, sale and leaseback arrangements, special considerations or
concessions granted by anyone associated with the sale.
46. An entity determines fair value without any deduction for transaction costs it
may incur on sale or other disposal.
47. The fair value of investment property shall reflect market conditions at
the reporting date.
48. Fair value is time-specific as of a given date. Because market conditions may
change, the amount reported as fair value may be incorrect or inappropriate
if estimated as of another time. The definition of fair value also assumes
simultaneous exchange and completion of the contract for sale without
any variation in price that might be made in an arm’s length transaction
between knowledgeable, willing parties if exchange and completion are not
simultaneous.
49. The fair value of investment property reflects, among other things, rental
revenue from current leases and reasonable and supportable assumptions that
represent what knowledgeable, willing parties would assume about rental
revenue from future leases in the light of current conditions. It also reflects,
on a similar basis, any cash outflows (including rental payments and other
outflows) that could be expected in respect of the property. Some of those
outflows are reflected in the liability whereas others relate to outflows that

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are not recognized in the financial statements until a later date (e.g. periodic
payments such as contingent rents).
50. Paragraph 34 specifies the basis for initial recognition of the cost of an interest
in a leased property. Paragraph 42 requires the interest in the leased property
to be remeasured, if necessary, to fair value. In a lease negotiated at market
rates, the fair value of an interest in a leased property at acquisition, net of all
expected lease payments (including those relating to recognized liabilities),
should be zero. This fair value does not change regardless of whether, for
accounting purposes, a leased asset and liability are recognized at fair value
or at the present value of minimum lease payments, in accordance with
paragraph 28 of IPSAS 13. Thus, remeasuring a leased asset from cost in
accordance with paragraph 34 to fair value in accordance with paragraph 42
should not give rise to any initial gain or loss, unless fair value is measured
at different times. This could occur when an election to apply the fair value
model is made after initial recognition.
51. The definition of fair value refers to “knowledgeable, willing parties”. In
this context, “knowledgeable” means that both the willing buyer and the
willing seller are reasonably informed about the nature and characteristics of
the investment property, its actual and potential uses, and market conditions
at the reporting date. A willing buyer is motivated, but not compelled, to
buy. This buyer is neither over-eager nor determined to buy at any price.
The assumed buyer would not pay a higher price than a market comprising
knowledgeable, willing buyers and sellers would require.
52. A willing seller is neither an over-eager nor a forced seller, prepared to
sell at any price, nor one prepared to hold out for a price not considered
reasonable in current market conditions. The willing seller is motivated to
sell the investment property at market terms for the best price obtainable. The
factual circumstances of the actual investment property owner are not a part
of this consideration because the willing seller is a hypothetical owner (e.g.,
a willing seller would not take into account the particular tax circumstances
of the actual investment property owner).
53. The definition of fair value refers to an arm’s length transaction. An arm’s
length transaction is one between parties that do not have a particular or
special relationship that makes prices of transactions uncharacteristic of
market conditions. The transaction is presumed to be between unrelated
parties, each acting independently.
54. The best evidence of fair value is given by current prices in an active market
for similar property in the same location and condition and subject to similar
lease and other contracts. An entity takes care to identify any differences in
the nature, location, or condition of the property, or in the contractual terms
of the leases and other contracts relating to the property.

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55. In the absence of current prices in an active market of the kind described
in paragraph 54, an entity considers information from a variety of sources,
including:
(a) Current prices in an active market for properties of different nature,
condition, or location (or subject to different lease or other contracts),
adjusted to reflect those differences;
(b) Recent prices of similar properties on less active markets, with
adjustments to reflect any changes in economic conditions since the
date of the transactions that occurred at those prices; and
(c) Discounted cash flow projections based on reliable estimates of future
cash flows, supported by the terms of any existing lease and other
contracts and (when possible) by external evidence, such as current
market rents for similar properties in the same location and condition,
and using discount rates that reflect current market assessments of the
uncertainty in the amount and timing of the cash flows.
56. In some cases, the various sources listed in the previous paragraph may suggest
different conclusions about the fair value of an investment property. An entity
considers the reasons for those differences, in order to arrive at the most reliable
estimate of fair value within a range of reasonable fair value estimates.
57. In exceptional cases, there is clear evidence when an entity first acquires
an investment property (or when an existing property first becomes an
investment property after a change in use) that the variability in the range of
reasonable fair value estimates will be so great, and the probabilities of the
various outcomes so difficult to assess, that the usefulness of a single estimate
of fair value is negated. This may indicate that the fair value of the property
will not be reliably determinable on a continuing basis (see paragraph 62).
58. Fair value differs from value in use, as defined in IPSAS 21, Impairment of
Non-Cash-Generating Assets and IPSAS 26, Impairment of Cash-Generating
Assets. Fair value reflects the knowledge and estimates of knowledgeable,
willing buyers and sellers. In contrast, value in use reflects the entity’s
estimates, including the effects of factors that may be specific to the entity
and not applicable to entities in general. For example, fair value does not
reflect any of the following factors, to the extent that they would not be
generally available to knowledgeable, willing buyers and sellers:
(a) Additional value derived from the creation of a portfolio of properties
in different locations;
(b) Synergies between investment property and other assets;
(c) Legal rights or legal restrictions that are specific only to the current
owner; and
(d) Tax benefits or tax burdens that are specific to the current owner.

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59. In determining the carrying amount of investment property under the fair
value model, an entity does not double-count assets or liabilities that are
recognized as separate assets or liabilities. For example:
(a) Equipment such as elevators or air-conditioning is often an integral
part of a building and is generally included in the fair value of the
investment property, rather than recognized separately as property,
plant, and equipment.
(b) If an office is leased on a furnished basis, the fair value of the office
generally includes the fair value of the furniture, because the rental
revenue relates to the furnished office. When furniture is included in
the fair value of investment property, an entity does not recognize that
furniture as a separate asset.
(c) The fair value of investment property excludes prepaid or accrued
operating lease revenue, because the entity recognizes it as a separate
liability or asset.
(d) The fair value of investment property held under a lease reflects
expected cash flows (including contingent rent that is expected to
become payable). Accordingly, if a valuation obtained for a property
is net of all payments expected to be made, it will be necessary to add
back any recognized lease liability, to arrive at the carrying amount of
the investment property using the fair value model.
60. The fair value of investment property does not reflect future capital
expenditure that will improve or enhance the property and does not reflect
the related future benefits from this future expenditure.
61. In some cases, an entity expects that the present value of its payments relating
to an investment property (other than payments relating to recognized
liabilities) will exceed the present value of the related cash receipts. An entity
applies IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets
to determine whether to recognize a liability and, if so, how to measure it.

Inability to Determine Fair Value Reliably

62. There is a rebuttable presumption that an entity can reliably determine
the fair value of an investment property on a continuing basis. However,
in exceptional cases, 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 determinable on a continuing basis.
This arises when, and only when, comparable market transactions are
infrequent and alternative reliable estimates 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

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construction is not reliably determinable but expects the fair value of

the property to be reliably determinable when construction is complete,
it shall measure that investment property under construction at cost
until either its fair value becomes reliably determinable 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 determinable on a continuing basis,
the entity shall measure that investment property using the cost model
in IPSAS 17. The residual value of the investment property shall be
assumed to be zero. The entity shall apply IPSAS 17 until disposal of the
investment property.
62A. Once an entity becomes able to measure reliably the fair value of an
investment property under construction that has previously been measured at
cost, it shall measure that property at its fair value. Once construction of that
property is complete, it is presumed that fair value can be measured reliably.
If this is not the case, in accordance with paragraph 62, the property shall be
accounted for using the cost model in accordance with IPSAS 17.
62B. The presumption that the fair value of investment property under construction
can be measured reliably can be rebutted only on initial recognition. An
entity that has measured an item of investment property under construction at
fair value may not conclude that the fair value of the completed investment
property cannot be determined reliably.
63. In the exceptional cases when an entity is compelled, for the reason given
in paragraph 62, to measure an investment property using the cost model in
accordance with IPSAS 17, it measures at fair value all its other investment
property, including investment property under construction. In these cases,
although an entity may use the cost model for one investment property, the
entity shall continue to account for each of the remaining properties using the
fair value model.
64. If an entity has previously measured an investment property at fair
value, it shall continue to measure the property at fair value until
disposal (or until the property becomes owner-occupied property or the
entity begins to develop the property for subsequent sale in the ordinary
course of operations) even if comparable market transactions become
less frequent or market prices become less readily available.

Cost Model
65. After initial recognition, an entity that chooses the cost model shall
measure all of its investment property in accordance with IPSAS  17’s
requirements for that model, i.e., at cost less any accumulated
depreciation and any accumulated impairment losses.

IPSAS 16 486
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Transfers
66. Transfers to or from investment property shall be made when, and only
when, there is a change in use, evidenced by:
(a) Commencement of 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; or
(d) Commencement of an operating lease (on a commercial basis)
to another party, for a transfer from inventories to investment
property.
(e) [Deleted]
67. A government’s use of property may change over time. For example, a
government may decide to occupy a building currently used as an investment
property, or to convert a building currently used as naval quarters or for
administrative purposes into a hotel and to let that building to private sector
operators. In the former case, the building would be accounted for as an
investment property until commencement of occupation. In the latter case,
the building would be accounted for as property, plant, and equipment until
its occupation ceased and it is reclassified as an investment property.
68. Paragraph 66(b) requires an entity to transfer a property from investment
property to inventories when, and only when, there is a change in use,
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
derecognized (eliminated from the statement of financial position) 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.
69. A government property department may regularly review its buildings to
determine whether they are meeting its requirements, and as part of that
process may identify, and hold, certain buildings for sale. In this situation, the
building may be considered inventory. However, if the government decided
to hold the building for its ability to generate rent revenue and its capital
appreciation potential, it would be reclassified as an investment property on
commencement of any subsequent operating lease.
70. Paragraphs 71–76 apply to recognition and measurement issues that arise
when an entity uses the fair value model for investment property. When an

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entity uses the cost model, transfers between investment property, owner-
occupied property, and inventories do not change the carrying amount of the
property transferred, and they do not change the cost of that property for
measurement or disclosure purposes.
71. For a transfer from investment property carried at fair value to owner-
occupied property or inventories, the property’s cost for subsequent
accounting in accordance with IPSAS 17 or IPSAS 12, shall be its fair
value at the date of change in use.
72. If an owner-occupied property becomes an investment property that will
be carried at fair value, an entity shall apply IPSAS 17 up to the date of
change in use. The entity shall treat any difference at that date between
the carrying amount of the property in accordance with IPSAS 17, and its
fair value in the same way as a revaluation in accordance with IPSAS 17.
73. Up to the date when an owner-occupied property becomes an investment
property carried at fair value, an entity depreciates the property and recognizes
any impairment losses that have occurred. The entity treats any difference at
that date between the carrying amount of the property in accordance with
IPSAS 17, and its fair value in the same way as a revaluation in accordance
with IPSAS 17. In other words:
(a) Any resulting decrease in the carrying amount of the property is
recognized in surplus or deficit. However, to the extent that an amount
is included in revaluation surplus for that property, the decrease is
charged against that revaluation surplus.
(b) Any resulting increase in the carrying amount is treated as follows:
(i) To the extent that the increase reverses a previous impairment
loss for that property, the increase is recognized in surplus or
deficit. The amount recognized in surplus or deficit does not
exceed the amount needed to restore the carrying amount to
the carrying amount that would have been determined (net of
depreciation) if no impairment loss had been recognized.
(ii) Any remaining part of the increase is credited directly to net
assets/equity in revaluation surplus. On subsequent disposal of
the investment property, the revaluation surplus included in net
assets/equity may be transferred to accumulated surpluses or
deficits. The transfer from revaluation surplus to accumulated
surpluses or deficits is not made through surplus or deficit.
74. For a transfer from inventories to investment property that will be carried
at fair value, any difference between the fair value of the property at that
date and its previous carrying amount shall be recognized in surplus or
deficit.

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75. The treatment of transfers from inventories to investment property that will
be carried at fair value is consistent with the treatment of sales of inventories.
76. When an entity completes the construction or development of a self-
constructed investment property that will be carried at fair value, any
difference between the fair value of the property at that date and its
previous carrying amount shall be recognized in surplus or deficit.

Disposals
77. An investment property shall be derecognized (eliminated from the
statement of financial position) on disposal or when the investment
property is permanently withdrawn from use and no future economic
benefits or service potential are expected from its disposal.
78. 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 IPSAS 9 for recognizing revenue from the sale
of goods and considers the related guidance in the Implementation Guidance
to IPSAS 9. IPSAS 13 applies to a disposal effected by entering into a finance
lease and to a sale and leaseback.
79. If, in accordance with the recognition principle in paragraph 20, an entity
recognizes in the carrying amount of an asset the cost of a replacement for
part of an investment property, it derecognizes the carrying amount of the
replaced part. For investment property accounted for using the cost model,
a replaced part may not be a part that was depreciated separately. If it is not
practicable for an entity to determine the carrying amount of the replaced
part, it may use the cost of the replacement as an indication of what the cost
of the replaced part was at the time it was acquired or constructed. Under
the fair value model, the fair value of the investment property may already
reflect that the part to be replaced has lost its value. In other cases it may be
difficult to discern how much fair value should be reduced for the part being
replaced. An alternative to reducing fair value for the replaced part, when it is
not practical to do so, is to include the cost of the replacement in the carrying
amount of the asset and then to reassess the fair value, as would be required
for additions not involving replacement.
80. Gains or losses arising from the retirement or disposal of investment
property shall be determined as the difference between the net disposal
proceeds and the carrying amount of the asset, and shall be recognized
in surplus or deficit (unless IPSAS 13 requires otherwise on a sale and
leaseback) in the period of the retirement or disposal.
81. The consideration receivable on disposal of an investment property is
recognized initially at fair value. In particular, if payment for an investment
property is deferred, the consideration received is recognized initially at the
cash price equivalent. The difference between the nominal amount of the

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consideration and the cash price equivalent is recognized as interest revenue

in accordance with IPSAS 9, using the effective interest method.
82. An entity applies IPSAS 19 or other standards, as appropriate, to any liabilities
that it retains after disposal of an investment property.
83. Compensation from third parties for investment property that was
impaired, lost, or given up shall be recognized in surplus or deficit when
the compensation becomes receivable.
84. 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 recognized in accordance with
IPSAS 21 or IPSAS 26, as appropriate;
(b) Retirements or disposals of investment property are recognized in
accordance with paragraphs 77–82 of this Standard;
(c) Compensation from third parties for investment property that was
impaired, lost, or given up is recognized in surplus or deficit when it
becomes receivable; and
(d) The cost of assets restored, purchased, or constructed as replacements
is determined in accordance with paragraphs 26–38 of this Standard.

Disclosure
Fair Value Model and Cost Model
85. The disclosures below apply in addition to those in IPSAS 13. In accordance
with IPSAS 13, the owner of an investment property provides lessors’
disclosures about leases into which it has entered. An entity that holds an
investment property under a finance lease or operating lease provides lessees’
disclosures for finance leases and lessors’ disclosures for any operating leases
into which it has entered.
86. An entity shall disclose:
(a) Whether it applies the fair value or the cost model;
(b) If it applies the fair value model, whether, and in what
circumstances, property interests held under operating leases are
classified and accounted for as investment property;
(c) When classification is difficult (see paragraph 18), the criteria it
uses to distinguish investment property from owner-occupied
property and from property held for sale in the ordinary course
of operations;

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(d) The methods and significant assumptions applied in determining

the fair value of investment property, including a statement
whether the determination of fair value was supported by market
evidence, or was more heavily based on other factors (which the
entity shall disclose) because of the nature of the property and lack
of comparable market data;
(e) The extent to which the fair value of investment property (as
measured or disclosed in the financial statements) is based on a
valuation by an independent valuer who holds a recognized and
relevant professional qualification and has recent experience in the
location and category of the investment property being valued. If
there has been no such valuation, that fact shall be disclosed;
(f) The amounts recognized in surplus or deficit for:
(i) Rental revenue from investment property;
(ii) Direct operating expenses (including repairs and
maintenance) arising from investment property that
generated rental revenue during the period; and
(iii) Direct operating expenses (including repairs and
maintenance) arising from investment property that did
not generate rental revenue during the period.
(g) The existence and amounts of restrictions on the realizability of
investment property or the remittance of revenue and proceeds of
disposal; and
(h) Contractual obligations to purchase, construct, or develop
investment property or for repairs, maintenance, or enhancements.

Fair Value Model

87. In addition to the disclosures required by paragraph  86, an entity
that applies the fair value model in paragraphs  42–64 shall disclose a
reconciliation between the carrying amounts of investment property at
the beginning and end of the period, showing the following:
(a) Additions, disclosing separately those additions resulting from
acquisitions and those resulting from subsequent expenditure
recognized in the carrying amount of an asset;
(b) Additions resulting from acquisitions through public sector
combinations;
(c) Disposals;
(d) Net gains or losses from fair value adjustments;

491 IPSAS 16

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(e) 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;
(f) Transfers to and from inventories and owner-occupied property;
and
(g) Other changes.
88. When a valuation obtained for investment property is adjusted
significantly for the purpose of the financial statements, for example
to avoid double-counting of assets or liabilities that are recognized as
separate assets and liabilities as described in paragraph 59, the entity
shall disclose a reconciliation between the valuation obtained and
the adjusted valuation included in the financial statements, showing
separately the aggregate amount of any recognized lease obligations that
have been added back, and any other significant adjustments.
89. In the exceptional cases referred to in paragraph 62, when an entity
measures investment property using the cost model in IPSAS  17, the
reconciliation required by paragraph 87 shall disclose amounts relating
to that investment property separately from amounts relating to other
investment property. In addition, an entity shall disclose:
(a) A description of the investment property;
(b) An explanation of why fair value cannot be determined reliably;
(c) If possible, the range of estimates within which fair value is highly
likely to lie; and
(d) On disposal of investment property not carried at fair value:
(i) The fact that the entity has disposed of investment property
not carried at fair value;
(ii) The carrying amount of that investment property at the
time of sale; and
(iii) The amount of gain or loss recognized.

Cost Model
90. In addition to the disclosures required by paragraph 86, an entity that
applies the cost model in paragraph 65 shall disclose:
(a) The depreciation methods used;
(b) The useful lives or the depreciation rates used;

IPSAS 16 492
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(c) The gross carrying amount and the accumulated depreciation

(aggregated with accumulated impairment losses) at the beginning
and end of the period;
(d) The reconciliation of 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 recognized as an asset;
(ii) Additions resulting from acquisitions through public sector
combinations;
(iii) Disposals;
(iv) Depreciation;
(v) The amount of impairment losses recognized, and the
amount of impairment losses reversed, during the period
in accordance with IPSAS 21 or IPSAS 26, as appropriate;
(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; and
(e) The fair value of investment property. In the exceptional cases
described in paragraph 62, when an entity cannot determine the
fair value of the investment property reliably, the entity shall
disclose:
(i) A description of the investment property;
(ii) An explanation of why fair value cannot be determined
reliably; and
(iii) If possible, the range of estimates within which fair value is
highly likely to lie.

Transitional Provisions
91. [Deleted]
92. [Deleted]
93. [Deleted]

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 INVESTMENT PROPERTY

Fair Value Model

94. [Deleted]
95. [Deleted]
96. [Deleted]
97. An entity that (a) has previously applied IPSAS 16 (2001), and (b) elects
for the first time to classify and account for some or all eligible property
interests held under operating leases as investment property, shall recognize
the effect of that election as an adjustment to the opening balance of
accumulated surpluses or deficits for the period in which the election is first
made. In addition, if the entity has previously disclosed publicly (in financial
statements or otherwise) the fair value of those property interests in earlier
periods, paragraph 94(a) applies. If the entity has not previously disclosed
publicly the information related to those property interests described in
paragraph 94(a), paragraph 94(b) applies.

Cost Model
98. [Deleted]
99. [Deleted]
100. For entities that have previously applied IPSAS 16 (2001), the
requirements of paragraphs 36–38 regarding the initial measurement of
an investment property acquired in an exchange of assets transaction
shall be applied prospectively only to future transactions.

Effective Date
101. An entity shall apply this Standard for annual financial statements
covering periods beginning on or after January 1, 2008. Earlier
application is encouraged. If an entity applies this Standard for a period
beginning before January 1, 2008, it shall disclose that fact.
101A. Paragraphs 12, 13, 40, 57, 59, 62, 63, and 66 were amended, paragraph 29
was deleted and paragraphs 62A and 62B were added by Improvements to
IPSASs issued in January 2010. An entity shall apply those amendments
prospectively for annual financial statements covering periods
beginning on or after January 1, 2011. An entity is encouraged to apply
the amendments to investment property under construction from any
date before January 1, 2011 provided that the fair values of investment
properties under construction were determined at those dates. If an entity
applies the amendments for a period beginning before January 1, 2011,
it shall disclose that fact and at the same time apply the amendments to
paragraphs 8 and 107A of IPSAS 17.

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101B. Paragraphs 91, 92, 93, 94, 95, 96, 98, 99 and 102 were amended by
IPSAS 33, First-time Adoption of Accrual Basis International Public
Sector Accounting Standards (IPSASs) issued in January 2015. An entity
shall apply those amendments for annual financial statements covering
periods beginning on or after January 1, 2017. Earlier application is
permitted. If an entity applies IPSAS 33 for a period beginning before
January 1, 2017, the amendments shall also be applied for that earlier
period.
101C. Paragraph 40 was amended by Improvements to IPSASs 2015 issued in
April 2016. An entity shall apply this amendment for annual financial
statements covering periods beginning on or after January 1, 2017.
Earlier application is encouraged. If an entity applies the amendment
for a period beginning before January 1, 2017 it shall disclose that fact.
101D. Paragraphs 3 and 4 were deleted and paragraph 9 was amended by The
Applicability of IPSASs, issued in April 2016. An entity shall apply those
amendments for annual financial statements covering periods beginning
on or after January 1, 2018. Earlier application is encouraged. If an
entity applies the amendments for a period beginning before January 1,
2018, it shall disclose that fact.
101E. Paragraph 18A was added and paragraphs 87 and 90 amended by
IPSAS 40, Public Sector Combinations, issued in January 2017. An entity
shall apply these amendments for annual financial statements covering
periods beginning on or after January 1, 2019. Earlier application is
encouraged. If an entity applies the amendments for a period beginning
before January 1, 2019 it shall disclose that fact and apply IPSAS 40 at
the same time.
102. When an entity adopts the accrual basis IPSASs of accounting as defined in
IPSAS 33, First-time Adoption of Accrual Basis International Public Sector
Accounting Standards (IPSASs) for financial reporting purposes subsequent
to this effective date, this Standard applies to the entity’s annual financial
statements covering periods beginning on or after the date of adoption of
IPSASs.

Withdrawal of IPSAS 16 (2001)

103. This Standard supersedes IPSAS 16, Investment Property, issued in 2001.

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 INVESTMENT PROPERTY

Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, IPSAS 16.
Revision of IPSAS 16 as a result of the IASB’s General Improvements Project
2003
Background
BC1. The IPSASB’s IFRS Convergence Program is an important element in the
IPSASB’s work program. The IPSASB policy is to converge the accrual basis
IPSASs with IFRSs issued by the IASB where appropriate for public sector
entities.
BC2. Accrual basis IPSASs that are converged with IFRSs maintain the
requirements, structure, and text of the IFRSs, unless there is a public sector-
specific reason for a departure. Departure from the equivalent IFRS occurs
when requirements or terminology in the IFRS are not appropriate for the
public sector, or when inclusion of additional commentary or examples is
necessary to illustrate certain requirements in the public sector context.
Differences between IPSASs and their equivalent IFRSs are identified in the
Comparison with IFRS included in each IPSAS.
BC3. In May 2002, the IASB issued an exposure draft of proposed amendments
to 13 International Accounting Standards (IASs)1 as part of its General
Improvements Project. The objectives of the IASB’s General Improvements
Project were “to reduce or eliminate alternatives, redundancies and conflicts
within the Standards, to deal with some convergence issues and to make other
improvements.” The final IASs were issued in December 2003.
BC4. IPSAS 16, issued in December 2001, was based on IAS 40 (2000),
Investment Property, which was reissued in December 2003. In late 2003,
the IPSASB’s predecessor, the Public Sector Committee (PSC),2 actioned an
IPSAS improvements project to converge, where appropriate, IPSASs with
the improved IASs issued in December 2003.
BC5. The IPSASB reviewed the improved IAS 40 and generally concurred with
the IASB’s reasons for revising the IAS and with the amendments made.
(The IASB’s Bases for Conclusions are not reproduced here. Subscribers
to the IASB’s Comprehensive Subscription Service can view the Bases for
Conclusions on the IASB’s website at http://www.iasb.org). In those cases

1
The International Accounting Standards (IASs) were issued by the IASB’s predecessor, the
International Accounting Standards Committee. The Standards issued by the IASB are entitled
International Financial Reporting Standards (IFRSs). The IASB has defined IFRSs to consist of
IFRSs, IASs, and Interpretations of the Standards. In some cases, the IASB has amended, rather than
replaced, the IASs, in which case the old IAS number remains.
2
The PSC became the IPSASB when the IFAC Board changed the PSC’s mandate to become an
independent standard-setting board in November 2004.

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 INVESTMENT PROPERTY

where the IPSAS departs from its related IAS, the Basis for Conclusions
explains the public sector-specific reasons for the departure.
BC6. IAS 40 has been further amended as a consequence of IFRSs issued after
December 2003. IPSAS 16 does not include the consequential amendments
arising from IFRSs issued after December 2003. This is because the
IPSASB has not yet reviewed and formed a view on the applicability of the
requirements in those IFRSs to public sector entities.

Revision of IPSAS 16 as a result of the IASB’s Improvements to IFRSs issued in

2008
BC7. The IPSASB reviewed the revisions to IAS 40 included in the Improvements
to IFRSs issued by the IASB in May 2008 and generally concurred with the
IASB’s reasons for revising the standard. The IPSASB concluded that there
was no public sector specific reason for not adopting the amendments.

Revision of IPSAS 16 as a result of the IPSASB’s The Applicability of IPSASs,

issued in April 2016
BC8. The IPSASB issued The Applicability of IPSASs in April 2016. This
pronouncement amends references in all IPSASs as follows:
(a) Removes the standard paragraphs about the applicability of IPSASs
to “public sector entities other than GBEs” from the scope section of
each Standard;
(b) Replaces the term “GBE” with the term “commercial public sector
entities”, where appropriate; and
(c) Amends paragraph 10 of the Preface to International Public Sector
Accounting Standards by providing a positive description of public
sector entities for which IPSASs are designed.
The reasons for these changes are set out in the Basis for Conclusions to
IPSAS 1.

497 IPSAS 16 BASIS OF CONCLUSIONS

 INVESTMENT PROPERTY

Illustrative Decision Tree

This decision tree accompanies, but is not part of, IPSAS 16.

Start

Is the property
Yes
held for sale in
the ordinary Use IPSAS 12, “Inventories”
course of
business?

No

Yes
Is the property Use IPSAS 17, “Property, Plant and
owner Equipment”
occupied? (cost or revaluation model)

No

The property is an
investment property.

Does the
Is the property Yes entity choose No
held under an to classify the Use IPSAS 13,
operating property as “Leases”
lease? investment
property?
No
Yes

Which model
is chosen for Use IPSAS 16, “Investment Property”
all investment Fair Value Model (Fair Value Model)
properties?

Use IPSAS 17, “Property, Plant and

Equipment” (cost model) with disclosure
Cost Model from IPSAS 16, “Investment Property”

IPSAS 16 ILLUSTRATIVE DECISION TREE 498

 INVESTMENT PROPERTY

Comparison with IAS 40

IPSAS 16 is drawn primarily from IAS 40 (2003), Investment Property and includes
amendments made to IAS 40 as part of the Improvements to IFRSs issued in May
2008. At the time of issuing this Standard, the IPSASB has not considered the
applicability of IFRS 4, Insurance Contracts, and IFRS 5, Non-current Assets Held
for Sale and Discontinued Operations, to public sector entities; therefore IPSAS
16 does not reflect amendments made to IAS 40 consequent upon the issue of those
IFRSs. The main differences between IPSAS 16 and IAS 40 are as follows:
●● IPSAS 16 requires that investment property initially be measured at cost and
specifies that where an asset is acquired for no cost or for a nominal cost, its
cost is its fair value as at the date of acquisition. IAS 40 requires investment
property to be initially measured at cost.
●● There is additional commentary to make clear that IPSAS 16 does not apply
to property held to deliver a social service that also generates cash inflows.
Such property is accounted for in accordance with IPSAS 17, Property,
Plant, and Equipment.
●● IPSAS 16 contains transitional provisions for both the first time adoption and
changeover from the previous version of IPSAS 16. IAS 40 only contains
transitional provisions for entities that have already used IFRSs. IFRS 1
deals with first time adoption of IFRSs. IPSAS 16 includes additional
transitional provisions that specify that when an entity adopts the accrual
basis of accounting for the first time and recognizes investment property
that was previously unrecognized, the adjustment should be reported in the
opening balance of accumulated surpluses or deficits.
●● IPSAS 16 uses different terminology, in certain instances, from IAS 40.
The most significant example is the use of the term “statement of financial
performance” in IPSAS 16. The equivalent term in IAS 40 is “income
statement.”
●● IPSAS 16 does not use the term “income,” which in IAS 40 has a broader
meaning than the term “revenue.”

499 IPSAS 16 COMPARISION WITH IAS 40