7 DAYS INTENSIVE WORKSHOP ON IFRS. Investment Property (IND AS 40) By: CA MAYUR CHOKSHI INVESTMENT PROPERTY

Transcription

1 7 DAYS INTENSIVE WORKSHOP ON IFRS Investment Property (IND AS 40) By: CA MAYUR CHOKSHI INVESTMENT PROPERTY Applies to the measurement in a lessee s financial statements of investment property held under a finance lease and to the measurement in the lessor sfinancial statements of investment property leased out under an operating lease Does not apply to Biological Assets Mineral, Oil, Gases, etc non generative resources (IFRS 6) 1

2 Key Terminology Investment property. Land or building, or part of a building, or both, held by the owner or the lessee under a finance lease to earn rentals and/or for capital appreciation, rather than for use in production or supply of goods and services or for administrative purposes or for sale in the ordinary course of business. Owner-occupied property. Property held by the owner or the lessee under a finance lease for use in production or supply of goods and servicesor for administrative purposes THE FRAMEWORK PRINCIPLES Interest held by a lesseee under a operating lease MAYbeclassified as aninvstproperty, if itmeets other criteria. Measured at Fair Value. Partly self occupied and partly out : If can be sold separately, each is accounted separately Else, as an Invst Property, only if insignificant portion is owner occupied. ( Insignificant 2% ) If services provided are insignificant then Investment Property One group co leases to another group co, at consolidation level Owner Occupied. But indiv co as an Invst Property. 2

3 Case study (a) Land held by XYZ Inc. for undetermined future use (b) A vacant building owned by XYZ Inc. and to be leased out under an operating lease (c) Property held by a subsidiary of XYZ Inc., a real estate firm, in the ordinary course of its business (d) Property held by XYZ Inc. for the use in production (e) A hotel owned by ABC Inc., a subsidiary of XYZ Inc., and for which ABC Inc. provides security services for its guests belongings Case study.. Answers (a) Land held by XYZ Inc. for undetermined future use (b) A vacant building owned by XYZ Inc. and to be leased out under an operating lease (c) Property held by a subsidiary of XYZ Inc., a real estate firm, in the ordinary course of its business (d) Property held by XYZ Inc. for the use in production (e) A hotel owned by ABC Inc., a subsidiary of XYZ Inc., and for which ABC Inc. provides security services for its guests belongings Invst Property a, b, e Inventory c PPE d 3

4 RECOGNITION It is probable that future economic benefits will flow to the entity; and The cost of the investment property can be measured etc. As per IND AS 16 MEASUREMENT Initial Measurement at Cost incl transaction cost Lease ; Lower of FV and the PV of Min Lease pmts. FV of the lease interest and not of property SUBSEQUENT MEASUREMENT : Cost Only Exception: If an entity elects to classify property held under an operating lease as investment property, then it must select the fair value model for all its investment property. Investment property backing liabilities that pay a return linked to the fair value of the assets; if so, the entity continues to have choice of models for its other Invst Prop. 4

5 TRANSFER TO & FROM INVST PROP Only when transfer evidence by : Commencement of owner occupation Commencement of development with a view to sale End of owner occupation Commencement of an operating lease to another party End of construction or development TRANSFER If FV Model is NOT used Owner Occuied trfd to Invst Prop Invst Prop at FV to PPE Inventories to Invst Prop Prop under Const trfd to Invst Prop Carrying Value, if Inventory Cost less Dep and Imparment loss, if PPE At Fv. Revaluation in FV wrtias 16 uto the date of change At FV and FV becomes Deemed Cost Remeasurementto FV diff in Income St. At FV Diff in Income Statement 5

6 DISPOSAL Derecognized on disposal or at the time that no benefit is expected from future use or disposal. Diff in Income Statement DISLOSURE SEPARATE STATEMENT 6

7 QUESTIONS?????????? CA MAYUR CHOKSHI TibrewalaHouse, 33, SwasticSoc, NS Road No 3, JVPD Scheme, MUMABI Be in touch through : mayur@mcnco.in WebSite : Facebook: LinkedIn : Convener of the Group IFRS HUB on Linkedin.com 7