TMI BlogInvestment PropertyX X X X Extracts X X X X X X X X Extracts X X X X ..... r cash equivalents paid or the fair value of other consideration 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n asset when, and only when: (a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; 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 enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set given up. 28 An entity determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are 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 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinuing basis (see paragraph 53). 49-52 [Refer Appendix 1] Inability to measure fair value reliably 53 There is a rebuttable presumption that an entity can reliably measure 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 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assified as held for sale (or is included in a disposal group that is classified as held for sale); (b) in accordance with Ind AS 116 if it is held by a lessee as a right-of-use asset and is not held for sale in accordance with Ind AS 105; and (c) in accordance with the requirements in Ind AS 16 for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (unless Ind AS 116 requires otherwise on a sale and leaseback) in the period of the retirement or disposal. ] 11 [ 70 The amount of consideration to be included in the gain or loss arising from the derecognition of an investment property is determined in accordance with the requirements for determining the transaction price in paragraphs 47-72 of Ind AS 115. Subsequent changes 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt property or for repairs, maintenance or enhancements. 76-78 [Refer Appendix 1] 79 In addition to the disclosures required by paragraph 75, an entity shall disclose: (a) the depreciation methods used; (b) the useful lives or the depreciation rates used; (c) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; (d) a 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 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Effective date 85 * 85A * 85B * 85C * 85D * 85E As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers , paragraphs 3(b), 9, 67and 70 are amended. An entity shall apply those amendments when it applies Ind AS 115. 32 [ 85F Ind AS 116, amended the scope of Ind AS 40 by defining investment property to include both owned investment property and property held by a lessee as a right-of-use asset. Ind AS 116 amended paragraphs 5, 7, 8, 9, 16, 20, 56, 67, 69 and 74, added paragraphs 19A, 29A, 40A and 84B and its related heading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Standard eg, the term balance sheet is used instead of Statement of financial position . 36 [ 7. The following paragraphs appear as Deleted in IAS 40. In order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40: (i) Paragraph 3 (ii) Paragraph 6 (iii) Paragraph 9(b) (iv) Paragraph 9(d) (v) Paragraph 22 (vi) Paragraph 34 (vii) Paragraphs 36-39 (viii) Paragraphs 42-47 (ix) Paragraph 49 (x) Paragraph 51 (xi) Paragraph 57(e) (xii) Paragraph 75(b) and (d) ] 15 [8. Paragraphs 80 to 84A of IAS 40 which deals with the transitional provisions have not been included in Ind AS 40 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 number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 57 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 to another party, for a transfer from inventories to investment property. (e) [Refer Appendix 1] 9. 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, 58 Paragraph 57(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in a lessee s financial statements of investment property interests held under a lease accounted for as a finance lease and to 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 Ind AS 17, Leases, including: (a) classification of leases as finance leases or operating leases; 6 [(b) recognition of lease income from investment property (see also Ind AS 115, Revenue from Contracts with Customers );] (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. 17. 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 Investment property is property (land or a building-or part of a building-or both) held (by the owner or by the lessee under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment property can be measured reliably. 22. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VII)] dated 30-03-2019 w.e.f. 01-04-2019 23. 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 20 An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. 24. 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 25 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 20 of Ind AS 17, ie the asset shall be recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be recognised as a liability in accordance with that same paragraph. 26 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless Ind AS 17 requires otherwise on a sale and leaseback) in the period of the retirement or disposal. 30. 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 74 The disclosures below apply in addition to those in Ind AS 17. In accordance with Ind AS 17, 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 provides lessees disclosures for finance leases and lessors disclosures for any operating leases into which it has entered. 31. 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 84B * 32. 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 85F * 33. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph 56, paragraph 59 (deletion of portion relating to fair value model), paragraph 68 (deletion of a portion dealing with fair value model), heading above paragraph 74 (deletion of the heading Fair value model and cost model ), 75(a) (disclosure of accounting policy) as compared to the wording used in IAS 40, heading above paragraph 76 (deletion of the heading Fair value model ), heading above paragraph 79 (deletion of the heading Cost model ) and paragraph 79 (deletion of the words that applies the cost model in paragraph 56 ). 36. 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 The following paragraphs appear as Deleted in IAS 40. In order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40: 14 [(i) Paragraph 9(b)] (i) 5 [***] (ii) Paragraph 9(d) (iii) Paragraph 22 (iv) Paragraphs 36-39 (v) Paragraphs 42-47 (vi) Paragraph 49 (vii) Paragraph 51 (viii) Paragraph 57(e) (ix) Paragraph 75(d) 37 Substituted vide NOTIFI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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