Section 14: Investment Property (AASB1061_04-26)

This section applies to investment property except when paragraph 1.5 or another section of this Standard requires or permits a different accounting treatment. 

Investment property is property (land or a building, or part of a building, or both) held by the owner to earn rentals or for capital appreciation or both, instead of for: 

(a) use in the production or supply of goods or services or for administrative purposes (‘owner-occupied property’); or 

(b) sale in the ordinary course of operations. 

In relation to (a), a property’s generation of incidental rental revenue does not preclude classifying that property as ‘owner-occupied’.

The accounting for owner-occupied property is set out in Section 15. The accounting for property held for sale in the ordinary course of operations is addressed by Section 12. Mixed-use property shall be classified and accounted for as property, plant and equipment in accordance with Section 15.

An entity shall record an investment property as an asset when it is purchased by, or donated to, the entity.

An investment property shall initially be measured at its cost. However, if an investment property was donated to the entity, the entity may elect to initially measure the property either at: 

(a) its cost to the entity (which might be nil, a nominal amount or another significantly discounted amount); or 

(b) its fair value as at the date of donation, measured in accordance with Section 11. Any resulting increase in investment property is recorded as donation income (revenue) in accordance with Section 20.

The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure such as legal and brokerage fees, property transfer taxes and other transaction costs. An entity shall determine the cost of a self-constructed investment property in accordance with paragraphs 15.5 and 15.6. 

After initial recording, an entity shall apply either the cost model in Section 15 or the fair value model in paragraph 14.8 as its accounting policy and, subject to paragraph 14.9, shall apply that policy to an entire class of investment property. Where an entity initially measures a donated investment property at fair value, this amount shall be regarded as its cost for the purposes of applying the cost model.

Under the fair value model, investment properties are measured at fair value, in accordance with Section 11, as at each reporting date with changes in fair value recorded in profit or loss. An entity that changes its accounting policy from the cost model to the fair value model for a class of investment property shall not subsequently revert to the cost model for that class.

When the fair value of a particular investment property cannot be measured reliably on a continuing basis, the entity shall measure that item using the cost model in Section 15 until disposal of the investment property. Applying the cost model to particular investment properties in the circumstances described in this paragraph is not a change in accounting policy.

An entity shall transfer a property to, or from, investment property 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.

When an entity uses the cost model, transfers between investment property, inventories and owner-occupied property do not change the cost or other carrying amount of the property transferred. For a transfer from investment property measured under the fair value model to inventories or owner-occupied property, the property’s fair value at the date of the change in use shall be regarded as its cost for the purposes of applying Section 12 or Section 15. 

An entity shall cease recording an investment property when the property is: 

(a) sold or otherwise disposed of; or 

(b) permanently withdrawn from use and no future economic benefits are expected from its disposal.

An entity shall determine the gain or loss arising from ceasing to record an investment property as the difference between the net disposal proceeds, if any, and the carrying amount of the property. An entity shall record the gain or loss in profit or loss in the reporting period in which the property ceases to be recorded as an asset. 

An entity shall disclose the information specified by paragraphs 15.27 and 15.28 for investment properties measured under the cost model.

An entity shall disclose the following information for investment property measured under the fair value model: 

(a) the extent to which the fair value is based on a valuation by an independent valuer; 

(b) the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal; 

(c) the amount of contractual commitments to purchase, construct or develop investment property; and 

(d) net gains or losses from fair value adjustments.

Where, in accordance with paragraph 14.5(a), an entity initially measures donated investment properties at cost, it shall make the disclosures set out in paragraphs 15.30 and 15.31 in relation to donated investment properties.