This free, guided checker walks your finance team through the key decision points for IAS 40 Investment Property Assessment. Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Investment property is held to earn rentals, for capital appreciation, or both, and generates cash flows largely independently of the entity's other assets (IAS 40.5; IAS 40.7). Test the primary purpose for which the asset is held, not incidental rental income. The common trap is treating property used in the entity's own operations, or held for sale in the ordinary course, as investment property.
The property fails the IAS 40.5 definition; classify it as owner-occupied PPE under IAS 16 or as inventory under IAS 2 per the examples in IAS 40.9.
Official guidance: IFRS issued standards
Owner-occupied property is accounted for under IAS 16 and property held for sale in the ordinary course of business under IAS 2; IAS 40.9 lists both as items that are not investment property. Weigh occupancy, development intent, and the significance of any ancillary services provided to occupants (IAS 40.11-40.13). Property held for future owner-occupation, or being developed for sale, is not investment property even while it is vacant.
Owner-occupied property is accounted for under IAS 16 and property held for sale in the ordinary course under IAS 2, not IAS 40 (IAS 40.9).
Official guidance: IFRS issued standards
A right-of-use asset relating to a property interest held by a lessee under a lease can be classified as investment property when it otherwise meets the IAS 40.5 definition (IAS 40.6). Identify whether the entity is a lessee and how the underlying property is used. Do not assume every leased property is investment property; own-use right-of-use assets remain within IAS 16 and IFRS 16.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
A lessee's right-of-use asset is investment property only when it is held to earn rentals - for example, sublet to third parties - or for capital appreciation rather than the lessee's own use (IAS 40.6). Review the sublease terms and the business purpose of the interest. A right-of-use asset the lessee occupies itself is an own-use asset, not investment property.
The lessee's right-of-use asset is used in its own operations, so classify it under IAS 16 / IFRS 16 own-use rather than as investment property (IAS 40.6).
Official guidance: IFRS issued standards
Under IAS 40.30 an entity chooses either the fair value model or the cost model as its accounting policy and applies it to all of its investment property; a mixed model within the class is not permitted, except the narrow IAS 40.32A case for property backing liabilities. Confirm the approved policy and that it is applied consistently. Electing fair value for some assets and cost for others in the same class is a common error.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
IAS 40.53 sets a rebuttable presumption that the fair value of investment property can be measured reliably on a continuing basis. The presumption is overcome only in exceptional cases where market transactions are infrequent and no reliable alternative estimate is available. Weigh active-market evidence, recent comparable transactions, and valuation-model reliability; where fair value is not reliably measurable, that property alone reverts to the IAS 16 cost model.
Fair value cannot be measured reliably on a continuing basis, so measure that property under the IAS 16 cost model as required by IAS 40.53.
Official guidance: IFRS issued standards
Under the fair value model, IAS 40.35 requires each period's change in fair value to be recognised in profit or loss, and no depreciation is charged. Confirm the remeasurement is booked to profit or loss, not to other comprehensive income or a revaluation reserve. Recording fair value movements in equity is a common misapplication carried over from the IAS 16 revaluation model.
Recognise the period's fair value change in profit or loss before reporting, as required by IAS 40.35.
Official guidance: IFRS issued standards
Under the cost model, IAS 40.56 requires measurement in accordance with IAS 16 - cost less accumulated depreciation and accumulated impairment (or IFRS 5 when held for sale). Confirm component depreciation and IAS 36 impairment testing are applied. The cost model still requires fair value to be disclosed, so obtaining a valuation is not optional.
Apply the IAS 16 cost-model recognition, depreciation, and impairment policies to the investment property (IAS 40.56).
Official guidance: IFRS issued standards
IAS 40.79(e) requires an entity using the cost model to disclose the fair value of its investment property, or an explanation when fair value cannot be measured reliably. Confirm a current valuation supports the note. Omitting fair value because the balance sheet uses cost is a frequent disclosure gap.
Prepare the IAS 40.79(e) fair value disclosure required for cost-model investment property.
Official guidance: IFRS issued standards
IAS 40.57 requires a transfer to or from investment property only when there is a change in use supported by evidence, such as the commencement or end of owner-occupation or of development for sale (IAS 40.58). Document the observable event, not merely a board decision. A change in management intention without a change in actual use does not trigger a transfer.
No transfer entries are required; continue the current investment property accounting (IAS 40.57).
Official guidance: IFRS issued standards
For a transfer out of investment property carried at fair value, the fair value at the date of change in use becomes deemed cost under IAS 16 (IAS 40.60). For a transfer from owner-occupied property to investment property carried at fair value, apply IAS 16 to the transfer date and treat the remeasurement difference as an IAS 16 revaluation (IAS 40.61). Under the cost model, transfers do not change the carrying amount (IAS 40.59).
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
The measurement on transfer depends on the model: under the cost model the carrying amount is unchanged (IAS 40.59); under the fair value model the property is remeasured to fair value at the date of change in use, with the difference recognised per IAS 40.60-40.62. Verify the transfer-date amount is fixed before posting. Only cost-model transfers are gain-or-loss neutral; fair-value-model transfers can create a revaluation surplus or a profit or loss effect.
Record the transfer at the IAS 40-prescribed amount and update the depreciation or fair value policy for the new classification (IAS 40.59-40.61). Determine the transfer-date carrying amount or fair value before posting the reclassification entries (IAS 40.59-40.61).
Official guidance: IFRS issued standards
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