IAS 40 Investment Property Free Essay Example, 2000 words

Overview of IAS 40 The overview of IAS 40 is split into four areas such that a brief history of IAS 40 is provided in the beginning followed by the definition of investment property which is used in IAS 40. Later on objective and scope of IAS 40 are described. Brief History of IAS 40 There has been a significant evolution with respect to Investment Property made by International Accounting Standard Board (IASB) such that the first issue of Investment Property was made in 1984 when an Exposure Draft E26 with the name of â€Å"Accounting for Investment† was issued. Within a period of 2 years, IASB issued a full fledge accounting standard on this area with the name of IAS 25 â€Å"Accounting for Investments†. However, in April 200, IASB replaced IAS 25 â€Å"Accounting for Investments† with a new standard named as â€Å"Investment Property† and withdrew previously issued IAS 25. IAS 40 is still applicable with having revised versions twice in 2003 and 2009. Investment Property Definition According to IAS 40, Investment Property is referred to as the property which is used by either the owner of the property or the lessee of the property under finance lease for the purpose of earning both of future rentals and capital appreciation or either of them. Objective of Investment Property As mentioned earlier, the core objective of this standard is to differentiate the property which is intended to be used in the ordinary course of the business with the one which is held by the owner or lessee under finance lease, for the purpose of generating rentals or capital gains. Scope of IAS 40 IAS 40 has outlined its scope such that this standard is applicable under the following kinds of properties (International Accounting Standards Board, 2008): 1.We will write a custom essay sample on IAS 40 Investment Property or any topic specifically for you Only $17.96 $11.86/pageorder now Holding land for the purpose of generating capital gains in future 2. Holding land for the unspecified future use 3. Leasing out a building classified as an operating lease 4. Holding a vacant building for the purpose of leasing it out classified as an operating lease 5. Underdeveloped and under-constructed property to be used as investment property in future The following items are specifically highlighted by IAS 40 which does not come under its domain: 1. Property which is in use for production, supply or for other administrative purposes 2. Property subject to IAS 2 which is used for the purpose of sale as an inventory 3. Property subject to IAS 11 which is used for construction purposes on behalf of third parties 4. Property subject to IAS 16 which is in use by the owner in the ordinary course of business 5.