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Thread: 27 - Indian Accounting Standard (Ind AS) 40 - Investment Property

  1. #11
    IND-AS
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    Thumbs up Transfers of Indian Accounting Standard (Ind AS) 40 - Investment Property

    Transfers of Indian Accounting Standard (Ind AS) 40

    Investment Property


    Transfers

    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 to Appendix 1]

    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 development, it continues to treat the property as an investment property until it is derecognised (eliminated from the balance sheet) 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.

    59. 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.

    60-65. [Refer to Appendix 1]


  2. #12
    IND-AS
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    Thumbs up Disposals of Indian Accounting Standard (Ind AS) 40 - Investment Property

    Disposals of Indian Accounting Standard (Ind AS) 40

    Investment Property


    Disposals

    66. An investment property shall be derecognised (eliminated from the balance sheet) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal.

    67. 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 Ind AS 18 for recognising revenue from the sale of goods and considers the related guidance in the Appendix E to Ind AS 18. Ind AS 17 applies to a disposal effected by entering into a finance lease and to a sale and leaseback.

    68. If, in accordance with the recognition principle in paragraph 16, an entity recognises in the carrying amount of an asset the cost of a replacement for part of an investment property, it derecognises the carrying amount of the replaced part. 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.

    69. 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 recognised in profit or loss (unless Ind AS 17 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.

    70. The consideration receivable on disposal of an investment property is recognised initially at fair value. In particular, if payment for an investment property is deferred, the consideration received is recognised initially at the cash price equivalent. The difference between the nominal amount of the consideration and the cash price equivalent is recognised as interest revenue in accordance with Ind AS 18 using the effective interest method.

    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 property are recognised in accordance with Ind AS 36;
    (b) retirements or disposals of investment property are recognised in accordance with paragraphs 66–71 of this Standard;
    (c) compensation from third parties for investment property that was impaired, lost or given up is recognised in profit or loss when it becomes receivable; and
    (d) the cost of assets restored, purchased or constructed as replacements is determined in accordance with paragraphs 20 –29 of this Standard.


  3. #13
    IND-AS
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    Thumbs up Disclosure of Indian Accounting Standard (Ind AS) 40 - Investment Property

    Disclosure of Indian Accounting Standard (Ind AS) 40

    Investment Property


    Disclosure

    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.

    75. An entity shall disclose:

    (a) its accounting policy for measurement of investment property.
    (b) [Refer to Appendix 1]
    (c) when classification is difficult (see paragraph 14), the criteria it uses to distinguish investment property from owner -occupied property and from property held for sale in the ordinary course of business.
    (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 recognised 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 recognised in profit or loss for:
    (i) rental income from investment property;
    (ii) direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period; and
    (iii) direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period.
    (iv) [Refer to Appendix 1]

    (g) the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.
    (h) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

    76-78. [Refer to 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 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 53, when an entity cannot determine the fair value of the investment property reliably, it 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.


  4. #14
    IND-AS
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    Thumbs up Appendix -A of Indian Accounting Standard (Ind AS) 40 - Investment Property

    Appendix -A of Indian Accounting Standard (Ind AS) 40

    Investment Property


    Appendix -A

    References to matters contained in other Indian Accounting Standards


    This Appendix is an integral part of Indian Accounting Standard (Ind AS) 40 Investment Property .

    1. Appendix A Income Taxes-Recovery of Revalued Non-Depreciable Assets contained in Ind AS 12, Income Taxes makes reference to this Standard also.


  5. #15
    IND-AS
    Guest

    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 40 - Investment Property

    Appendix - 1 of Indian Accounting Standard (Ind AS) 40

    Investment Property


    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 differences, if any, between Indian Accounting Standard (Ind AS) 40 and the corresponding International Accounting Standard (IAS) 40, Investment Property.

    Comparison with IAS 40, Investment Property

    1. IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition . Ind AS 40 permits only the cost model. The following paragraphs of IAS 40 which deal with fair value model have been deleted in Ind AS 40. In order to maintain consistency with paragraph numbers of IAS 40, the paragraph numbers are retained in Ind AS 40:

    (i) Paragraph 6
    (ii) Paragraph 31
    (iii) Paragraphs 32A-32C
    (iv) Paragraphs 33-35
    (v) Paragraph 41
    (vi) Paragraph 50
    (vii) Paragraph 52
    (viii) Paragraphs 60-65
    (ix) Paragraph 75(b)
    (x) Paragraph 75(f)(iv)
    (xi) Paragraphs 76-78

    2. The transitional provisions given in IAS 40 have not been included in Ind AS 40 since 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.

    3. IAS 40 requires disclosure of fair values of investment property when cost model is used. Since this requirement is retained in Ind AS 40, paragraphs 53, 53A, 53B, 54 and 55 and certain other paragraphs of IAS 40 have been modified. The modifications include substitution of fair value measurement with fair value determination/disclosure and deletion of reference to use of cost model when fair value determination is unreliable.

    4. IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied. In such cases, the operating lease would be accounted as if it were a finance lease. Since Ind AS 40 prohibits the use of fair value model, this treatment is prohibited in Ind AS 40. As a result, paragraph 6 of IAS 40 has been deleted in Ind AS 40 (see point 1(i) above). In addition, the expression ‘investment property under a finance or operating lease’ appearing in paragraph 74 of IAS 40 has been modified as ‘investment property under a finance lease’ in Ind AS 40.

    5. As a result of prohibition of use of fair value model in Ind AS 40, there are some modifications in the wording of paragraph 26 (removal of the words ‘for the fair value model’), paragraphs 30 and 32 (Accounting policy), heading above para graph 33 (‘Fair value determination’ instead of ‘Fair value model’), para graph 56 , paragraph 59 (deletion of portion relating to fair value model), para graph 68 (deletion of a portion dealing with fair value model), heading above para graph 74 (deletion of the heading ‘Fair value model and cost model ’) and 75(a) (disclosure of accounting policy) as compared to the wording used in IAS 40 .

    6. Different terminology is used in this Standard e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’.

    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 9(d)
    (ii) Paragraph 22
    (iii) Paragraph 57(e)

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