As indicated in the standard, the land and buildings used to obtain rental income, capital appreciation (generation of valuations) or both, are classified as investment properties for accounting purposes.
Investment properties are real estate and, for this reason, also commonly called real estate; This type of property corresponds to land or buildings intended exclusively for rental or generation of valuations. These investment properties are found in the International Financial Information Accounting Standard
investment properties can use the fair value or cost-depreciation-impairment model, and it will be up to the organization’s management to choose the modality; For its part, in section 16, despite the fact that the two models indicated above are also used, there is an important technical expression that must be taken into account, and that is that investment properties must be measured at fair value, but when at cost or disproportionate effort, they cannot do it,
Assets that can be measured as investment property
As indicated in the standard, the land and buildings used to obtain rental income, capital appreciation (generation of valuations) or both, are classified as investment properties for accounting purposes.
Under this definition, it is clear that not every good delivered for rent is an investment property. It is noted that only real estate, whether land or buildings, that the organization has intended to be rented and generate profits are considered as such; Said leasing activity can be carried out totally or partially (a part of the property, or just an area).
Now, it is important to evaluate that the company that intends to register a particular good as investment property, is not dedicated solely to the administration of goods that are delivered as a lease and that it receives all the income from said activity; In this case, it is necessary for the company to engage in another activity, and that it additionally have said leasing business.
Therefore, the following are some assets that could be classified in the group of investment properties:
Land for future uses not determined.
Building rented through operating lease.
Vacant building that is intended to be leased in the future through an operating lease.
Real estate that is being built or improved for future use as investment property.
Frequent questions….
It will be recognized in the case of properties that are maintained, by the owner or lessee, under a financial lease, to obtain rents, capital gains or both. In the case of operating leases, it may be accounted for as investment property, only when the lessee can measure the fair value of the ownership interest without undue cost or effort.
For its cost on initial recognition. The cost includes the purchase price, plus any expenses directly attributable to it. In the case of properties, whose fair value can be measured reliably without disproportionate effort, they will be measured at fair value on each reporting date, recognizing in results, changes in fair value.
as non-current assets.
When investment property is carried at fair value, it will be disclosed:
– The methods and assumptions used in determining the fair value of the investment property.
– The extent to which the fair value of investment properties is based on an appraisal made by an independent appraiser.
– Contractual obligations for the acquisition, construction or development of investment properties, or for repairs, maintenance or improvements thereof.
– A reconciliation showing separately:– Additions.
– Net gains or losses from fair value adjustments.
– Transfers to property, plant and equipment.