PracticeConsultingInternational standard set for investment property

International standard set for investment property

The International Accounting Standards Committee has published its latest standard on investment property.

IAS40 prescribes the accounting treatment for investment property – defined as property held to earn rentals or for capital appreciation – and related disclosure requirements.

The standard requires enterprises to choose one of two accounting models and to apply that model consistently to all of its investment property.

The two models are a fair value model – in which investment property should be measured at fair value and changes in fair value recognised in the income statement – or a cost model – where investment property should be measured at depreciated cost.

A change from one model to the other should be made only if the change will result in a more appropriate presentation. The standards states this will be highly unlikely to be the case for a change from the fair value model to the cost model.

‘As a result, enterprises will have to give a clearer picture of the activities and performance of their investment property,’ said Per Gunslev, chairman of the IASC steering committee on investment property.

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