Investment Property - Proposed Accounting Policies for the Philippines

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Chapter IX - INVESTMENT PROPERTY

1. Introduction. Investment property is property (land or a building – or part of a building – or both) held to earn rentals or for capital appreciation or both, rather than for:

1. use in the production or supply of goods or services or for administrative purposes; or 2. sale in the ordinary course of business.

These properties are distinguished from owner-occupied properties which generate cash flows that are directly attributable to the regular operation of the agency. Investment property generates cash flows that are largely independent of the other assets of the agency because they are merely held to earn rentals or for capital appreciation or both.

2. Scope. This Chapter shall apply to accounting for investment property including the measurement in a lessee’s financial statements of investment property interests held under a lease accounted for as a finance lease and to the measurement in an owner’s financial statements of investment property provided to a lessee under an operating lease. The following topics are not included because these will be covered under the Chapter on Leases:

a. Classification of leases as finance or operating leases; b. Recognition of lease revenue from investment property; c. Measurement in a lessee’s financial statements of property interests held under a lease accounted for as an operating lease; d. Measurement in a lessor’s financial statements of its net investments in a finance lease; e. Accounting for sale and leaseback transactions; and

f. Disclosure about finance and operating leases.

However, this Chapter shall not apply to the following:

a. Biological assets related to agricultural activity; and b. Mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.

The following are examples of investment property and are therefore within the scope of this Chapter:

a. land held for long-term capital appreciation rather than for short-term sale; b. land held for a currently undetermined future use;
c. a building owned by the reporting enterprise (or held by the reporting enterprise under a finance lease) and leased out under one or more operating leases; and d. a building that is vacant but is held to be leased out under one or more operating leases.

The following are examples of items that are not investment property and are therefore outside the scope of this Chapter:

a. property held for sale in the ordinary course of operations or in the process of construction or development for such sale; b. property being constructed or developed on behalf of third parties; c. owner-occupied property, including:

1. property held for future use as owner-occupied property; 2. property held for future development and subsequent use as owner-occupied property; 3. property occupied by employees; and

4. owner-occupied property awaiting disposal;
d. property that is being constructed or developed for future use as investment property; e. property that is leased to another agency under a finance lease; and f. property held for use in the production or supply of goods or services or for administrative purposes;

3. Definitions. The following terms are used in this Chapter with the meanings specified:

a. Carrying amount is the amount at which an asset is recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses thereon. b. Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction. c. Exchange transactions are transactions in which one entity receives assets or services, or has liabilities...
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