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MFRS 140 Investment Property - Coggle Diagram
MFRS 140
Investment Property
RECOGNITION
Assets
probably the future economic benefits that are associated with the investment property will flow to the entity
the cost of the investment property can be measured reliably
An entity evaluates under this recognition principle all its investment property costs at the time they are incurred
Costs incurred initially to acquire an investment property
Costs incurred subsequently to add to, replace part of, or service a property
Does not recognize
Carrying amount of an investment property the costs of the day-to-day servicing of such a property
Through replacement
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.
An investment property held by a lessee as a right-of-use asset shall be recognized in accordance with MFRS 16.
SCOPE
Applies to the measurement in a lessee’s financial statements of investment property interests held under a lease accounted for as a finance lease
Applies to the measurement in a lessor’s financial statements of investment property provided to a lessee under an operating lease
Applies in the recognition, measurement and disclosure of investment property
does not apply to
Biological assets related to agricultural activity (MASB ED 50 Agriculture)
Mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources
MEASUREMENT AT RECOGNITION
An investment property shall be measured initially at its cost.
Transaction costs shall be included in the initial measurement.
The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure
Example of directly attributable expenditure
professional fees for legal services
property transfer taxes
other transaction costs
Cost of an investment property is not increased by
start-up costs
operating losses incurred before the investment property achieves the planned level of occupancy
abnormal amounts of wasted material, labour or other resources incurred in constructing or developing the property
If payment for an investment property is deferred, its cost is the cash price equivalent
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 FRS 117
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 recognised as a liability
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 an investment property, the item accounted for at fair value is that interest and not the underlying property
DISPOSALS
An investment property shall be derecognised (eliminated from the statement of financial position) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal
The gains or losses resulting from the retirement or disposal of investment property should be calculated as the variance between the net disposal proceeds and the carrying amount of the asset.
Gains or losses should be reflected in the profit or loss for the period of the retirement or disposal, unless FRS 117 stipulates otherwise in the case of a sale and leaseback.
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.
TRANSFERS
An entity shall transfer a property to, or from, investment property when, and only when, there is a use change
A use change occurs when the property meets or ceases to meet, the definition of investment property and there is evidence of the use change
commencement of owner-occupation, or development with a view to owner-occupation, for a transfer from investment property to owner-occupied property
commencement of development with a view to sale, for a
transfer from investment property to inventories
end of owner-occupation, for a transfer from owner-occupied
property to investment property
inception of an operating lease to another party, for a transfer from inventories to investment property
For a transfer from investment property carried at fair value to owner-occupied property or inventories
the property’s deemed cost for subsequent accounting following MFRS 116, MFRS 16 or MFRS 102 shall be its fair value at the date of change in use
If an owner-occupied property becomes an investment property that will be carried at fair value, an entity shall apply MFRS 116 for owned property and MFRS 16 for property held by a lessee as a right-of-use asset up to the date of use change
The entity shall treat any difference at that date between the carrying amount of the property under MFRS 116 or MFRS 16 and its fair value in the same way as a revaluation under MFRS 116
Up to the date when an owner-occupied property becomes an investment property carried at fair value, an entity depreciates the property (or the right-of-use asset) and recognises any impairment losses that have occurred.
At that date, any difference between the carrying amount of the property under MFRS 116 or MFRS 16 and its fair value is treated in the same way as a revaluation under MFRS 116.
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 recognised in profit or loss.
CLASSIFICATION OF PROPERTY AS INVESTMENT
PROPERTY OR OWNER‑OCCUPIED PROPERTY
Investment property is held to earn rentals or for capital appreciation or both
examples
land held for long-term capital appreciation rather than for short-term sale in the ordinary course of business.
a building that is vacant but is held to be leased out under one or
more operating leases.
a building owned by the entity and leased out under one or more
operating leases.
property that is being constructed or developed for future use as
investment property.
land held for a currently undetermined future use.
non-examples
property intended for sale in the ordinary course of business or
in the process of construction or development for such sale
owner-occupied property including property held for future use as owneroccupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees and owner-occupied property awaiting disposal.
property that is leased to another entity under a finance lease.
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
sold separately
an
entity accounts for the portions separately
could not 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.
an entity provides ancillary services to the occupants of a
property it holds
treats such a property as investment property if
the services are insignificant to the arrangement as a whole
MEASUREMENT AFTER RECOGNITION
Accounting policy
an entity shall choose as its
accounting policy either the fair value model or the
cost model and shall apply that policy to all of its
investment property.
either the fair value model or the cost model for all other
investment property
either the fair value model or the cost model for all investment property backing liabilities that pay a return linked directly to the fair value of, or returns from, specified assets including that investment property
Fair value model
A gain or loss arising from a change in the fair value of investment
property shall be recognised in profit or loss for the period in which it
arises.
If an entity has previously measured an investment property at fair
value, , it shall continue to measure the property at fair value until
disposal even if comparable market transactions become less
frequent or market prices become less readily available.
The investment property is not depreciated
Cost model
in accordance with MFRS 5 Non-current Assets Held for Sale and Discontinued Operations if it meets the criteria to be classified as held for sale
in accordance with MFRS 16 if it is held by a lessee as a rightof-use asset t and is not held for sale in accordance with MFRS 5
in accordance with the requirements in MFRS 116 for the cost
model in all other cases.
DISCLOSURE
relate to
Criteria for classification as investment property
Assumptions in determining fair value
Use of independent professional valuer (encouraged but not required)
Rental income and expenses
Any restrictions or obligations (IAS 40: paras. 74 - 79 )
Choice of fair value model or cost model
cost model
These relate mainly to the depreciation method. In addition, an entity which adopts the cost model must disclose the fair value of the investment property
Fair value model
An entity that adopts this must also disclose a reconciliation of the carrying amount of the investment property at the beginning and end of the period
DEFINITIONS
Cost:
the amount attributed to that asset when initially recognised in accordance with the specific requirements of other MFRSs
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
Carrying amount
amount at which an asset is recognised in the
statement of financial position
Fair value
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
Investment property
property held to earn rentals or for capital appreciation or both
Owner-occupied property
property held for use in the production or supply of goods or
services or for administrative purposes
OBJECTIVE
Prescribe the accounting treatment for investment property and related disclosure requirements