Ind AS 40, Investment Property, outlines the accounting treatment and disclosure requirements for investment properties, which are properties held to earn rental income, capital appreciation, or both. The standard applies to all entities that hold investment properties, regardless of whether the properties are owner-occupied or leased out to others.
Under Ind AS 40, investment properties are initially recognized at cost, including transaction costs. After initial recognition, entities have a choice to measure investment properties at either fair value or cost model. If fair value is chosen, changes in fair value are recognized in profit or loss. If the cost model is selected, investment properties are carried at cost less accumulated depreciation and impairment losses.
Transfers between categories (from investment property to owner-occupied property or vice versa) are allowed only when there has been a change in the use of the property supported by evidence. Such transfers are accounted for at fair value, and any difference is recognized in profit or loss.
Ind AS 40 also requires entities to disclose information about their investment properties, including the fair value, the method used to determine fair value, and significant restrictions on the ability to transfer investment properties.
