IAS 40 INVESTMENT PROPERTY
1 THE CONCEPT OF “INVESTMENT PROPERTY”
Investment property is property (i.e. land or a building – or part of a building – or both) held (by its owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both (IAS 40.5).
Properties held for sale in the ordinary course of business are inventories and not investment property (IAS 40.5 and IAS 2.6). The business model of an entity (i.e. the entity's intentions regarding that property) is the primary criterion for classifying a property as inventory or as investment property.1
Investment property also has to be distinguished from owner-occupied property. Owner-occupied property is held (by the owner or by the lessee under a finance lease) for use in the production or supply of goods or services or for administrative purposes. If owner-occupied property is expected to be used during more than one period, it meets the definition of property, plant, and equipment (IAS 40.5 and IAS 16.6).
Property being constructed or developed on behalf of third parties does not represent investment property. Instead, revenue is recognized according to IAS 11 if the buyer is able to specify the major structural elements of the design of the real estate, and otherwise according to IAS 18 (IAS 40.9b, IAS 11.3, and IFRIC 15).
A building owned by the entity or held by the entity under a finance lease and leased out under one or more operating leases is an example of investment property (IAS 40.8c). ...