Have you heard of the term investment property? Do you want to understand more about this concept and delve a bit deeper? Our Accountants at GCS Malta highlight this term in the following article for our readers to understand better what investment property is.
What is an investment property?
Investment property refers to building or land or sometimes both, in certain circumstances. It may also refer to investment property that is being redeveloped. The land or building is:
- held to earn rentals or for capital appreciation or both;
- not owner-occupied;
- not used in production or supply of goods and services, or for administration; and
- not held for sale in the ordinary course of business.
Measurement of investment property.
Measurement of investment property is measured initially at cost. Property interest held under a lease is measured following IAS 17 at the lower of the fair value of the property interest and the present value of the minimum lease payments.
For subsequent measurement, an entity must adopt either the fair value model or the cost model as its accounting policy for all investment properties. All entities must determine fair value for measurement (if the entity uses the fair value model) or disclosure (if it uses the cost model). Fair value reflects market conditions at the end of the reporting period.
Under the fair value model, investment property is remeasured at the end of each reporting period. Changes in fair value are recognised in profit or loss as they occur. Fair value is the price at which the property could be exchanged between knowledgeable, willing parties in an arm’s length transaction without deducting transaction costs (see IFRS 13).
Under the cost model, investment property is measured at cost less accumulated depreciation and any accumulated impairment losses. Fair value is disclosed.
Gains and losses on disposal are recognised in profit or loss.
Why GCS Malta?
At GCS Malta, our accounting team can aid you with all your accounting needs by providing you with quality service and sound advice. So invest now and contact us today.
