Indian Accounting Standard (Ind AS) 40, Investment Property, Important Material
Ind AS 40 : Investment Property
This standard prescribes accounting treatment of investment property and related disclosure.
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, and it is dealt in Ind AS 40.
It is different from owner-occupied property which is held [by the owner (Ind AS 16) or by the lessee as a right-of-use asset (Ind AS 116)] for use in the production or supply of goods or services or for administrative purposes.
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 business.
(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 or for short-term sale in the ordinary course of business, 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.
(d) a building that is vacant but is held to be leased out under one or more operating leases.
(e) property that is being constructed or developed for future use as investment property.
The following are examples of items that are not investment property and are therefore outside the scope of this Standard:
(a) property intended for sale in the ordinary course of business or in the process of construction or development for such sale (see Ind AS 2, Inventories), for example, property acquired exclusively with a view to subsequent disposal in the near future or for development and resale.
(b) owner-occupied property (see Ind AS 16), 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 (whether or not the employees pay rent at market rates) and owner-occupied property awaiting disposal.
(c) property that is leased to another entity under a finance lease.
An owned investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement.
An investment property held by a lessee as a right-of-use asset shall be measured initially at its cost in accordance with Ind AS 116.
An entity shall adopt as its accounting policy the cost model for subsequent measurement of all of its investment property.
This Standard requires all entities to measure the fair value of investment property, for the purpose of disclosure even though they are required to follow the cost model.
After initial recognition, an entity shall measure investment property in accordance with Ind AS 16’s requirements for cost model, unless it is investment property classified as held for sale (or are included in a disposal group that is classified as held for sale) which shall be measured in accordance with Ind AS 105.