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Revaluation of investment property

28 August 2008 2,063 views No Comment

Hi,

Thanks for the information.

I would like to know, if we use cost model than also are we require to do the revaluation.

best regards

Suraj

Hi Suraj,

Investment property is defined as property held (by the owner or lessee under a finance lease) to rentals and/or for capital appreciation, rather than for

-use in the production or supply of goods and services for administrative purposes; or

-sale in the ordinary course of business

IAS 40 covers investment property held by all enterprises and is not limited to enterprises whose main activies are in this area. Under IAS 40, an enterprise must choose either a fair value model i.e. investment property should be measured at fair value and changes in fair value should be recognised in the income statement; or a cost model (the same as the benchmark treatments in IAS 16, Property, Plant and Equipment), i.e. investment property should be measured at depreciated cost (less any accumulated impairment losses).

In order to value investment properties, an independent valuer who holds a recognised and relevant professional qualification, and has recent experience in the location and category of the properties being valued.

The valuer should determine the fair value of the properties based on current prices in an active market for similar properties in the same location and condition and subject to similar leases and other contracts.

Regards

Dear all

Hi I am Suraj ratan Mohta from India. Working in a real estate compnay. i need some advice on the IFRS related from the comitte member. We follow Indian GAAP

My query is

1) Is it necesary to revalue the investment property as per IFRS.

2) if ane one can provide me the template

Regards
Suraj

Hi Suraj,

Unfortunately if you use the cost model, you still have to get the property appraised because IAS 40 requires the disclosure of the fair value of the property. This means you have to bear the cost of an appraiser if you report at cost. The advantage of the cost model is that you can switch to fair value model from the cost model, however you cannot switch back to the cost model when you report at fair value. In cost model you are immune from the changes in the value of the property but you stil have to depreciate. In fair value model, you do not depreciate the property but the changes in the fair value of the property is reflected in the profit and loss.

Hope this was helpful

Osman

I have to add this:

In cost model you also have to recognize impairment losses meaning that if the value (the calculation of this value is stated in IAS 36) falls below the net book value then you need to recognize this loss again in profit and loss.

Thanks a lot.

this infomation was quite helpful.

regards

Suraj