Yu.A. Inozemtseva, accounting and taxation expert

International accounting: investment property

Accounting for investment property under IFRS: from initial recognition to disposal

In Russian accounting there is no special accounting standard regulating the accounting of objects that bring income to the organization in the form of rental payments. Such assets are reflected in account 03 “Income-generating investments in material assets” and are considered a type of fixed assets in clause 5 PBU 6/01.

In international accounting, there is a special type of asset called investment property (IP), which is a bit like our income-generating investments. How to account for these items is discussed in IAS 40 Investment Property. In this article we will analyze the main provisions of this standard.

What is an investment property

AI is land or building owned by a company (whether owned or leased) for the purpose of obtaining pp. 5, 7 IAS 40:

• <или>lease payments from operating (short-term) leases;
• <или>income from the increase in their value due to an increase in market price.

If real estate is intended for rental, then it can be recognized as an AI only if the company leases it for operating (short-term) lease.

If real estate is leased out on a financial (long-term) lease, it is not considered a lease, but is accounted for by the lessor in accordance with IAS 17 Leases. The fact is that according to IFRS rules, during a finance lease, the object is reflected in the lessee’s accounts. And the lessor only has accounts receivable from the lessee and paragraph 36 IAS 17. Note that the definition of operating lease as short-term and financial lease as long-term is somewhat simplified. The characteristics of a financial lease are given in detail in paragraphs. 8, 10 IAS 17.

If a company has acquired, for example, a plot of land, but has not yet decided how it will be used, it is considered that the plot was purchased for the purpose of increasing its value and should be accounted for as AI.

If a building is intended for sale in the near future, but is rented out while buyers are sought, it should be accounted for as inventory rather than as AI. Because the organization will receive the main income from this asset when it is sold.

For a group of companies, qualifying an asset as an AI has some peculiarities.

For example, one of the group companies leases a building to another group company and recognizes it as AI in its reporting. The second company uses it as an OS. This means that this building must be recognized as OS in the consolidated statements. Because ultimately, from the point of view of the group of companies, this building is not used as an AI, but for its own needs. As a reminder, consolidated financial statements present the assets, liabilities, equity, revenues, expenses and cash flows of the parent and its subsidiaries as if the group of companies were a single company.

We wrote in detail about consolidation:

The question may arise: why in international accounting, unlike in Russian, are AI and OS different types of assets? Moreover, the same objects of property - land and buildings - can, under certain conditions, be both OS and AI.

The main difference between AI and other types of assets (in particular, from OS) is that the company receives cash flows from AI independently of other assets owned by it. In other words, AI can bring benefits on its own, while the benefits that the OS brings are closely related to the risks of the company as a whole.

For example, if a building is leased for operating lease and generates income for the organization in the form fixed rent payments are AI.

And if a hotel is located in the building and the company receives income from accommodating guests, then the hotel building is an operating system, since the income that the company receives depends on the results of the hotel business as a whole paragraph 12 IAS 40.

If the building is used to house the plant’s administration, it will also be accounted for as fixed assets, since it brings income to the organization only together with its other assets.

Sometimes it happens that a building is partly rented out and partly used in the main activities of the company. There are two accounting options available here. You can account for parts of the building as separate assets (fixed assets and investment property). If this cannot be done, then the building will be accounted for as investment property only if a minor part of it is used in the main activity. Otherwise, the entire building must be taken into account as OS paragraph 10 IAS 40.

Recognition and initial assessment

AI should be recognized as an asset if:

• there is a likelihood of economic benefits from AI;
• its value can be reliably estimated paragraph 16 IAS 40.

For example, before building a property, the developer must obtain a construction permit from the state, and also, possibly, rent a plot of land for subp. 5 paragraph 3 art. 8, paragraph 2, art. 51 of the Town Planning Code of the Russian Federation. However, developers often incur significant costs even before obtaining permission. These costs are subject to recognition by the AI ​​only if there is no doubt that approval will be obtained. Otherwise, they are not recognized as an asset, but are written off as expenses, since it is unknown whether economic benefits will be received.

AI should initially be assessed based on actual costs(acquisition costs plus direct necessary costs) paragraph 20 IAS 40. At the same time, excess losses of raw materials, labor or other resources that occurred during the construction of real estate are not included in the cost of the AI, but are written off as expenses, since such costs are not necessary. The organization sets its own standards for resource consumption.

As a rule, a newly built property does not immediately reach the planned level of income. Nevertheless, the organization bears the costs of its maintenance (heating, water supply to the building). These costs are also not included in the cost of AI, but are recognized as expenses in full. paragraph 23 IAS 40.

We wrote about how to properly keep records during long deferred payments:

If the investment is acquired on a deferred payment basis, the asset is recognized at the immediate payment price, and the difference between this amount and the total payment is recognized as expense as interest on the loan. paragraph 24 IAS 40.

If property qualified as II is owned by a company on a leasehold basis, then it is recognized in accounting at the lower of two values. paragraph 25 IAS 40:

• <или>at the fair value of the property;
• <или>at the present value of the minimum lease payments.

If significant costs are incurred for major repairs of an AI object, these costs are capitalized (accounted for as an AI object or included in the cost of the repaired AI object) paragraph 19 IAS 40. Costs for current minor repairs are included in expenses in the period in which they are incurred. paragraph 18 IAS 40.

Measurement after initial recognition

For accounting at subsequent reporting dates, the company can choose one of two methods of accounting for AI after initial recognition and apply it to all items. paragraph 30 IAS 40:

• <или>at fair value (FV);
• <или>at actual costs (at original cost).

However, if the object is owned by a company under an operating (short-term) lease, then it can only account for it at fair value and paragraph 34 IAS 40.

If the company has chosen the fair value accounting model, then it cannot be changed to the historical cost accounting model, since it is believed that the CC accounting model provides more reliable information subp. "b" paragraph 14 IAS 8; paragraph 31 IAS 40.

In practice, AI is most often measured at fair value rather than actual costs.

Fair value measurement

Under this accounting model, after initial recognition, AI is measured at CV at the end of each reporting period. The standard defines CV as the price for which an asset can be sold in a commercial transaction on a voluntary basis between market participants. paragraph 5 IAS 40. This means that on the date of the transaction the parties have reliable information about the property and the state of the market, the seller is not forced to sell the building, and the buyer is not forced to buy it.

The SS of an unfinished AI object is more difficult to determine than the SS of finished buildings. Because properties under construction are sold relatively rarely and there is no active market for them. Therefore, the standard allows an unfinished AI facility to be accounted for at its original cost before completion of construction, even if the company has chosen the SS investment property accounting model for its existing AI facilities.

All amounts of markdowns and revaluations of AI to CC are included in income or expenses for this reporting period. pp. 33- 35 IAS 40. For example, a company purchased AI for RUB 10,000,000. The costs of legal support for the purchase amounted to 500,000 rubles. AI was taken into account in the valuation of RUB 10,500,000. (RUB 10,000,000 + RUB 500,000). Let’s assume that at the reporting date the CC has not changed and amounted to RUB 10,000,000. This means that the organization must write off 500,000 rubles as expenses. (RUB 10,500,000 – RUB 10,000,000).

Let us recall that, unlike AI, the amounts of additional valuation of fixed assets are included in capital (that is, in Russian accounting - to account 83).

If AI is valued at CC, then depreciation is not charged on it.

Unlike fixed assets, AI (accounted for at fair value) is not separated into its components in accounting. That is, for example, elevators, air conditioning systems and other building elements are recorded as part of a single AI object - the building. The cost of these elements is already contained in the price that the buyer pays to the seller, that is, this amount is not allocated separately paragraph 50 IAS 40.

If the AI ​​is built with borrowed money and valued at CC, then the company has a choice: upon initial recognition, interest can be included in the cost of the AI, or it can be written off as expenses. Since when revalued according to the SS, the difference between the actual costs of acquiring AI and its SS is in any case included in income (expenses), the chosen option for accounting for interest on loans does not affect profit and net assets.

Estimation based on actual costs

AI accounted for at actual costs is reflected in accounting according to the rules established for OS with an accounting model at historical cost and paragraph 30 IAS 16.

We wrote about asset accounting according to IFRS rules:

This means that the asset must be recognized at cost and depreciated over the period paragraph 56 IAS 40. In addition, the asset should be regularly tested for impairment and, if necessary, impaired. pp. 30, 63 IAS 16.

If AI is accounted for at actual costs, then the object is taken into account broken down into components so that significant parts with different SPI are depreciated separately. pp. 43, 44 IAS 16.

The actual cost accounting model is used in practice much less frequently than the SS accounting model, since:

• the company will still have to determine CC in order to disclose it in the notes to the financial statements;
• if the capital increases, no income will be reflected in the company’s statements, but if it decreases, expenses from depreciation of the asset will appear, since the rule on the mandatory reduction in the value of an asset when it is depreciated applies to the asset in the same way as to fixed assets paragraph 63 IAS 16.

If AI objects were accounted for at actual costs, and then the company decided to account for them at SS, then the increase in the cost of objects is reflected directly in retained earnings, and not through income (expenses).

Reclassification

Reclassification is a change in the classification of an asset when the way it is used changes. So, if the purpose of the AI ​​changes, then the object must be taken into account in accordance with its new purpose. This is possible if a decision is made paragraph 57 IAS 40:

• <или>on the use of AI as an operating system, that is, in the company’s core activities;
• <или>about reconstruction for subsequent sale. In this case, the AI ​​object is transferred to the inventory category. If the sale of an object accounted for under the SS occurs without preliminary reconstruction, then it is accounted for as an asset until disposal paragraph 58 IAS 40.

If, on the contrary, the company begins to lease a building that was previously used as fixed assets or intended for sale, then the asset must be transferred from fixed assets (or inventory) to AI subp. “c”, “d” paragraph 57 IAS 40.

If the company uses an accounting model according to actual costs, then the object is transferred between the categories of fixed assets, AI and inventories according to book value and paragraph 59 IAS 40.

If the accounting model is used according to SS, then the rules are like this. Items are transferred from AI to fixed assets or inventories at fair value at the date of change of purpose paragraph 60 IAS 40. If the last revaluation was carried out a long time ago, then the carrying amount of an item accounted for under the CC may differ from its CC at the date of reclassification.

If a reclassification is made from AI to fixed assets, then the difference between the carrying amount of the item and its new CC must be taken into account as a revaluation of fixed assets according to the rules of IAS 16 paragraph 61 IAS 40; pp. 39, 40 IAS 16. And if an object is transferred to inventory, then the difference is taken into account in income (expenses).

Disposal

An AI object is removed from the balance sheet when it is retired or withdrawn from service. paragraph 66 IAS 40.

This happens when it is sold or transferred to a financial lease from paragraph 67 IAS 40.

Sometimes AI retires not completely, but partially - when replacing large parts of an asset. Thus, if a company replaces a large part of an AI asset and recognizes the cost of purchasing the new part and replacing it in the asset's carrying amount, it must write off the cost of the replaced part. For assets that are valued at cost, the cost of the large replaced part can be determined because it is likely to have been depreciated separately.

If the AI ​​is valued according to CC, then it is not entirely obvious how to evaluate and write off the cost of the replaced part. After all, if significant parts of an asset are worn out, this has most likely already affected the CV of this asset. If a company finds it difficult to determine the book value of the replaced part in the AI, then you can simply increase the book value of the item by the cost of the new element and, without writing off the cost of the worn-out part, revaluate the AI ​​according to CC paragraph 68 IAS 40.

The financial result from the disposal of AI in the statement of comprehensive income (for us - the income statement) is shown collapsed as the balance between the proceeds from disposal and the book value of the asset. paragraph 69 IAS 40.

The main difficulty in applying IAS 40 is not in the accounting area, but in adequately measuring the fair value of AI. Indeed, during periods of crisis, the market value of AI can be greatly underestimated. However, it is not accountants who determine the SS of objects, but professional appraisers (despite the fact that IAS 40 does not require this).

international accounting

INVESTMENT PROPERTY

A. V. Suvorov,

Candidate of Economic Sciences

The IASB Board approved the new investment property standard, IAS 40, which is effective for financial statements for periods beginning on or after 1 January 2001. The provisions of this standard replace the previous requirements set out in IAS 25 Investment Accounting. In accordance with IFRS 25, a credit institution was allowed to choose the method of accounting for investment property (at residual value in accordance with the basic accounting procedure set out in IFRS 16 “Property, Plant and Equipment”; at revalued cost less depreciation in accordance with the permissible alternative accounting procedure set out in IFRS 16; at cost less the amount of impairment in accordance with IFRS 25 or at the revalued amount in accordance with IFRS 25). The provisions of IFRS 25 cease to apply when IFRS 40 comes into effect.

Investment property is property (land, buildings and/or parts of buildings, or both) held by the owner or lessee under a finance lease for the purpose of obtaining rent or capital appreciation benefits, or and other, except for the following cases:

Use in the production or sale of goods (services) or for administrative purposes;

Sales in the ordinary course of business.

IFRS 40 considers economic categories such as:

Owner-occupied property (that is, property held for use in the production or sale of goods (services) or for management purposes) that, under IFRS 16, is stated at either its residual value or a revalued amount less subsequent depreciation; (property, for-

owner-occupied is property held (by the owner or lessee under a finance lease) for use in the production or supply of goods, provision of services or for administrative purposes);

Property held for sale in the ordinary course of business, which, in accordance with IFRS 2 Inventories, is stated at the lower of cost or net realizable value;

Objects under construction or under reconstruction, which are expected to be used in the future as investment property - IFRS 16 is used to account for such objects in the process of their construction or reconstruction, and after completion of construction or reconstruction, these objects are transferred to the category “investment property”, and the provisions of this standard begin to apply to them. However, this Standard applies to existing investment properties that are being renovated for future use as investment properties;

A lessee's interest under an operating lease that is subject to IFRS 17 Leases;

Forests and other renewable natural resources;

Rights to use subsoil, activities for exploration and development of minerals, oil deposits, natural gas and other non-renewable natural resources.

In accordance with the provisions of the standard under consideration, credit institutions

allowed to choose:

♦ fair value accounting model: investment property is stated at fair value, and changes in fair value are recognized in the income statement;

♦ accounting model based on the initial cost of acquisition. The acquisition cost model is established as the primary accounting method in IFRS 1: investment property is stated at its residual value (less impairment losses). A credit institution that chooses the cost model must disclose the fair value of investment property. Fair value model

differs from the revalued cost model, which is permitted to be applied to certain non-financial assets. Under the revaluation model, the excess of the carrying amount over cost is recognized as a revaluation surplus, while under the fair value model, all changes in fair value are recognized in the income statement.

For the first time, the IASB board allowed non-financial assets to be accounted for at fair value. Although many commenters on the draft standard supported this proposal, some still had significant practical and conceptual reservations regarding the application of the fair value model to non-financial assets. In addition, some experts believe that the markets for certain types of property are not yet sufficiently developed to successfully apply the fair value model. Many experts believe that it is impossible to accurately define investment property. In this regard, it is currently inappropriate to introduce a requirement for the mandatory use of the fair value accounting model.

For these reasons, the IASB Board does not consider it appropriate at this stage to introduce a requirement for the mandatory application of the fair value accounting model to investment property. At the same time, the board considers it appropriate

allow the fair value model to be used. This evolutionary step forward will allow preparers and users of financial statements to gain experience in applying the fair value model, while giving markets for certain types of property time to develop further.

In accordance with the provisions of this standard, a credit institution is required to apply the selected accounting model in relation to all investment properties. The transition from one model to another should only be made when it leads to a more acceptable presentation of information. The standard states that such a situation is not practicable when moving from the fair value model to the cost model.

The exception is when, at the time of acquisition of an investment property (or when an existing property first acquires the status of an investment property, either after completion of construction or renovation, or after a change in its use), it is obvious that the company will not always be able to reliably determine the fair value of the investment property. In such cases, the company must measure the investment property in accordance with the basic accounting principles set out in IFRS 16 until it disposes of it, assuming that the residual value of the investment property is nil. An entity that elects to use the fair value model records all other investment properties at fair value.

IFRS 40 provides methods by which a credit institution can determine whether it should apply IFRS 40 (for investment properties) rather than IFRS 16 Property, Plant and Equipment (for owner-occupied properties or properties under construction or undergoing renovation that are expected to be used in the future as investment property), or IFRS 2 Inventories (for property held for sale in the ordinary course of business).

The purpose of IFRS 40 is to prescribe the accounting for investment property and related disclosure requirements. Therefore, this standard applies to the recognition, measurement and disclosure of investment property.

IFRS 40 also addresses how a lessee's financial statements measure investment property under a finance lease, and how a lessor's financial statements measure investment property under an operating lease. The standard does not address issues set out in IFRS 17 Leases, such as:

F - classification of lease into financial and

operating room; -F- recognition of income from rental of investment property (this issue is also set out in IFRS 18 “Revenue”); ^ the procedure for assessing investment property under an operating lease agreement in the financial statements of a lessee; -F- the procedure for assessing investment property given under financial lease in the financial statements of the lessor; -F- accounting for sales transactions with leaseback;

F - disclosure of information regarding finance and operating leases. This standard does not apply to:

Forests and other renewable natural resources;

Rights to use subsoil, exploration and production of minerals, oil, natural gas and other non-renewable natural resources.

It should be noted that investment properties are intended to earn rental income or capital gains, or both. Therefore, the cash flows generated by investment property are generally not related to the rest of the assets of the lending institution. This distinguishes an investment property from an owner-occupied property. Cash flows arising in the process of production or supply of goods, provision of services (or use of an item of fixed assets for management purposes) relate not only to the item of fixed assets, but also to other assets.

to you used in the process of production or delivery of goods (services). Owner-occupied property is accounted for in accordance with IFRS 16 Property, Plant and Equipment.

Examples include the following investment properties:

Land held to benefit from capital appreciation over the long term rather than to be realized in the short term in the ordinary course of business;

Land, the further purpose of which has not yet been determined. (Where the lending institution has not decided whether it will use the land as owner-occupied property or for short-term disposal in the ordinary course of business, the land is deemed to be held for capital appreciation);

A facility owned by the reporting credit institution (or held by the reporting company under a finance lease) and leased under one or more operating leases;

A structure not currently occupied but intended to be leased under one or more operating leases.

Examples of non-investment property assets to which IAS 40 does not apply should also be provided:

An asset held for sale in the ordinary course of business, or an asset under construction or undergoing renovation for the purpose of sale (unless accounting for the asset is provided for by IFRS 2 Inventories); for example, property acquired solely for subsequent sale in the near future or for renovation and resale;

An object under construction or under reconstruction on behalf of third parties (if accounting for this asset is not provided for by IFRS 11 “Construction Contracts”);

♦ owner-occupied property (unless accounting for the asset is provided for in IFRS 16 Property, Plant and Equipment), including (among other things) property intended for continued use as owner-occupied property; property intended to be redeveloped and subsequently used as owner-occupied property; properties occupied by employees of a lending institution (whether the employees pay market rent or not), as well as owner-occupied properties held for disposal;

♦ an object under construction or under reconstruction, which is expected to be used as an investment property in the future. In relation to such an item, the provisions of IFRS 16 apply until the completion of construction work or reconstruction, when the item becomes an investment property, and the provisions of IAS 40 begin to apply to its accounting. However, the provisions of this standard apply when accounting for existing investment property that is being redeveloped in for further use as investment property.

In some cases, part of the property may be used to generate rent or capital appreciation; and the other part is for the production or supply of goods, provision of services or for administrative purposes. If these parts of the object can be sold independently of each other (or independently given out on financial lease), the credit institution accounts for these parts of the object separately. If parts of the object cannot be sold separately, the object is considered investment property only when a minor part of this object is intended for the production or supply of goods, provision of services or for administrative purposes.

A lending institution may provide support services to tenants of properties it owns. In this case, the credit institution considers this

property as an investment property, provided that the services provided constitute a relatively minor part of the overall transaction. For example, the owner of an office complex provides tenants with security services and ongoing maintenance of the building.

However, there are times when the services provided constitute a significant part of the transaction. For example, if a lending institution owns and operates a hotel, then the services provided to guests are an essential component of the entire range of hotel services. Thus, a hotel operated by an owner-lending institution is not an investment property but an owner-occupied property.

It can sometimes be difficult to determine whether ancillary services are so significant that a property cannot be classified as an investment property. For example, a hotel owner sometimes delegates certain functions to a third party under a management agreement. The terms of such management agreements vary widely. The owner may effectively be in the position of a passive investor. The owner can delegate certain operational management functions to a third party, but continues to bear the risk of sudden changes in cash flows associated with the hotel.

Determining whether a property meets the definition of an investment property requires professional judgment. The lending institution develops certain criteria for the consistent use of professional judgment in accordance with the investment property definition and guidelines. According to IFRS 40, a credit institution is required to disclose these criteria in cases where it is difficult to classify an object into a particular category.

At the same time, in accordance with IFRS 17 Leases, the lessee does not capitalize the property held under an operating lease. Therefore, the lessee does not treat its interest in such property as an investment property.

Sometimes an organization owns property that is leased and occupied by a parent company or another subsidiary. In the consolidated financial statements, which pre-

information is provided for both companies, the property is not shown as an investment property because, from the view of the entire group, the property is owner-occupied property. However, from the point of view of the individual owning entity, an item is an investment property if it meets the definition. Therefore, the lessor reports the property as investment property in its financial statements.

Recognition, measurement and costs

Investment property should be recognized as an asset when:

There is a possibility that future economic benefits associated with the investment property will flow to the credit institution;

The value of an investment property can be reliably estimated.

When deciding whether an item meets the first recognition criterion, a credit institution must assess the degree of certainty about the inflow of future economic benefits based on the information available at the time of initial recognition. The second recognition criterion is generally met because the exchange transaction that confirms the acquisition of the asset determines its value.

Investment property should initially be valued at cost. Transaction costs should be included in the initial estimate.

The cost of purchased investment property includes the purchase price and any direct costs. Direct costs include, for example, professional legal fees, transfer taxes and other transaction costs.

The cost of self-constructed investment property is the value at the date of completion of construction or renovation. Before this date, the credit institution must apply IFRS 16 “Fixed Assets”. Upon completion of construction or renovation, the property acquires the status of investment property and is subject to

the provisions of the standard in question begin to spread.

Commissioning costs (except for those cases when they are necessary to bring the facility into working condition), initial operating losses before reaching the planned level of rental of premises, as well as the amount of excess consumption of materials, labor and other resources during the construction or reconstruction of facilities property are not included in the cost of investment property.

When payment is deferred for investment property, the cost price is the price of the property when paid in cash without deferred payment. The difference between this amount and the final payment is recognized as interest expense over the term of the loan.

Subsequent costs associated with reported investment property should be included as an increase in the carrying amount of the investment property when it is probable that the credit institution will receive future economic benefits in excess of the standards originally calculated for the existing investment property. All other subsequent costs should be recognized as expenses in the period in which they are incurred.

The treatment of costs incurred after the acquisition of investment property depends on the circumstances that were taken into account when the property was initially measured and recognized. For example, if the carrying amount of an investment property already takes into account the loss of future economic benefits, then subsequent costs to restore the expected future economic benefits of the asset are capitalized. The same situation arises when the purchase price of an asset reflects the company's obligation to make the costs necessary in the future to bring the asset into working condition. An example of this would be the acquisition of a structure in need of modernization. In such cases, subsequent costs are included in the carrying amount.

As the accounting policy of a credit institution, you should choose either an accounting model

either the fair value model or the cost model and apply this policy to all investment properties.

In accordance with IFRS 8 “Net profit or loss for the period, fundamental errors and changes in accounting policies”, a voluntary change in accounting policy is carried out only if it leads to a more accurate presentation of events or transactions in the financial statements of the credit institution. It is unlikely that a change from the fair value model to the cost model will provide improved information.

Under IAS 40, all entities are required to determine the fair value of investment property for the purposes of measurement (under the fair value model) or disclosure (under the cost model). Companies are encouraged, but not required, to determine the fair value of investment property based on the valuation of an independent valuer who has a recognized and appropriate professional qualification and experience in valuing investment property of a similar category and location.

Fair value model

After initial recognition, an institution that elects the fair value model records all investment properties at fair value, with certain exceptions as described below.

Gains or losses arising from changes in the fair value of investment property should be recognized in net profit or loss for the period in which they arise.

Fair value is the amount of money for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.

The fair value of an investment property is usually its

market price. By definition, fair value is the most probable price prevailing in the market at the reporting date. This is the best price a seller can expect and the best price a buyer can expect. Fair value is not the estimated price that is inflated or underestimated as a result of special conditions or circumstances, such as unusual financing arrangements, sale-leaseback transactions, preferential consideration or discounts provided by any party involved in the sale transaction.

When determining fair value, a credit institution does not deduct costs that may arise in connection with the sale or other disposal of an asset.

The fair value of investment property should reflect market conditions and actual conditions at the reporting date and not as of any past or future date.

The estimated fair value is based on a specific time period. Because market conditions and conditions may change, the estimated value may not be correct at another time. In addition, the determination of fair value assumes the exchange of assets and the execution of the purchase and sale agreement at the same time without any change in price, which would occur in a transaction between knowledgeable, willing parties in an arm's length transaction if when the exchange of assets and the execution of the contract occur at different times.

Among other things, determining the fair value of an investment property takes into account the income from existing leases and the reasonable and reasonable assumptions of market participants regarding the expected income from future leases based on current market conditions.

The definition of fair value refers to “knowledgeable and willing parties to enter into the transaction.” In this context, “well informed” means that both the seller and the buyer wishing to enter into such a transaction are reasonably informed about the nature and fundamental

international accounting

characteristics of the investment property, its actual and potential uses and market conditions at the reporting date.

The buyer who wishes to complete this transaction is interested in the purchase, but is not obligated to complete it. He does not seek or is determined to acquire this or that property at any price. Such a buyer acquires assets in accordance with current market conditions and current market expectations, and not in accordance with an imaginary or hypothetical market whose conditions cannot be demonstrated or anticipated. The intended buyer will not pay a price higher than the current market price. The actual owner of the investment property is included in the market participants.

A willing seller is not seeking or coerced into doing so; he is not willing to sell the property at any price, but he does not intend to insist on a price that is not considered reasonable under current market conditions. A willing seller has an incentive to sell the investment property based on market conditions at the best price that can be obtained on the open market after proper market research, regardless of what that price is. The actual conditions in which the actual owner of the investment property is located are not taken into account, since the seller willing to complete this transaction is a hypothetical owner of the said property.

The expression "after proper marketing research" means that the investment property will be offered for sale in the most appropriate manner for the purpose of sale at the highest price. The period during which an investment property will be offered for sale may vary depending on market conditions, but this period must be sufficient to ensure that the required number of potential buyers pay attention to the investment property. The period during which the investment property is offered for sale is assumed to be before the reporting date.

The definition of fair value refers to “transactions between arm's length parties.” Such transactions are carried out between parties not connected by any special relationship, as a result of which transaction prices are set that are atypical for the market. It is assumed that the transaction is made between unrelated parties, with each of them acting independently.

Fair value is generally best evidenced by prevailing prices in an active market for similar properties that are located in the same area, are in the same condition, and are subject to similar leases and other covenants. The task of the credit institution is to identify any differences in the nature, location and condition of the property, as well as in the terms of the lease and other agreements relating to this property.

In the absence of current prices on the market, the credit institution takes into account information from various sources, including: ■F - current prices on the active market for property of a different nature in a different condition or in a different territory (or which is subject to different terms of lease or other agreements), adjusted for existing differences; And the most recent prices in less active markets, adjusted to take into account any changes in economic conditions after the date of transactions at these prices; -F- discounted cash flow forecasts based on reliable estimates of future cash flows, which are based on the terms of existing leases and other contracts, as well as (where possible) data from external sources, such as current tariffs for renting similar property in the same territory , and discount factors are used that take into account the degree of uncertainty assessed by the market regarding the size and timing of cash flows. In some cases, the different sources of information identified in the previous paragraph result in different estimates of the fair value of an investment property. The Company is reviewing the reasons for these discrepancies to determine the most appropriate

correct fair value within relatively narrow limits of fluctuation of its values.

The exception is when, at the time the investment property is acquired (or when an existing property first becomes an investment property, either after completion of construction or renovation, or after a change in its use), it becomes clear that the boundaries within which the fair value lies will be are so large and the likelihood of any outcome so difficult to estimate that the usefulness of a clear definition of fair value is negated. This may indicate that it is not possible to reliably determine the fair value of an investment property at any given time.

Fair value differs from value in use, as defined in IAS 36 Impairment of Assets. Fair value reflects information and estimates by market participants and factors relevant to market participants as a whole. Conversely, value in use reflects company-specific information and estimates as well as company-specific factors that may not apply to all companies. For example, fair value does not reflect:

Additional value as a result of creating a portfolio of property in different territories;

Synergies resulting from the joint use of investment property and other assets;

Legal rights and legal restrictions regarding a specific property owner;

Tax benefits and tax burdens specific to a particular property owner.

When determining the fair value of investment property, a credit institution should avoid re-accounting for assets or liabilities that are recognized on the balance sheet as separate assets or liabilities. These include, for example:

Equipment such as elevators and air conditioning often form an integral part of the building, so

it is usually included in investment property and is not reflected separately as part of property, plant and equipment; If a furnished office is leased, the fair value of the office generally includes the fair value of the furniture since the rent is charged for the furnished office. When the cost of furniture is included in the fair value of investment property, the company does not recognize furniture as a separate asset. The fair value of investment property also does not include prepayments or accrued income under operating leases because the entity separately records these items as liabilities or assets.

The fair value of investment property does not reflect future capital investments in the property for the purpose of renewing or improving it, nor the future economic benefits of future capital investments.

In some cases, a credit institution expects that the present value of payments associated with investment property (other than payments on reported financial liabilities) will exceed the present value of the related cash receipts. An entity should use the provisions of IAS 37 Provisions, Contingent Liabilities and Contingent Assets when deciding whether or not to recognize such liabilities and how to measure them.

It is assumed that a credit institution will always be able to determine the fair value of investment property with a reasonable degree of reliability. However, the exception is when, at the time of acquisition of an investment property (or when an existing property first acquires the status of an investment property, either after the completion of construction work or the reconstruction stage, or after a change in its purpose), it becomes obvious that a credit institution will not always be able to reliably determine a fair the value of an investment property. This occurs only in cases where comparable transactions in the market are not carried out

often there are no alternative estimates of fair value (for example, based on discounted cash flow forecasts). In such cases, the entity should use the primary accounting method set out in IAS 16 Property, Plant and Equipment to measure its investment property. It should be assumed that the liquidation value of the investment property is zero. An entity should continue to apply the provisions of IFRS 16 until the disposal of the investment property.

In exceptional cases, when, for the reasons specified in the previous paragraph, a credit institution is forced to measure an investment property in accordance with the basic accounting principles set out in IFRS 16, it should record all other investment properties at fair value.

If a credit institution has recorded an investment property at fair value, it must continue to record the property at fair value until it is sold (or until the property becomes owner-occupied property or the company begins to renovate the property to subsequent sale in the ordinary course of business), even despite the reduction in the number of comparable transactions in the market and the unavailability of market prices.

Historical acquisition cost model

After initial recognition, an entity that has chosen the cost model should record all investment properties at cost less accumulated depreciation and accumulated impairment losses using the basic accounting treatment of IFRS 16 Property, Plant and Equipment.

Cost (original cost) is the amount of cash or cash equivalents paid, or the fair value of other consideration given to pay for the cost of an asset at the time of its acquisition or construction.

is carried out only when the purpose of the object changes, namely when: -F- the owner begins to occupy the property - the object is transferred from investment property to the category “owner-occupied property”; -F- reconstruction begins for the purpose of sale - the object is transferred from investment property to reserves; ■F - the period during which the owner occupies the property ends - the property is transferred from the category “owner-occupied property” to investment property; -F- the object is leased to a third party under an operating lease agreement - the object is transferred from reserves to investment property; -F- construction work or reconstruction of the property is completed - the object is transferred from the category of “investment in construction or reconstruction in progress” (discussed in IFRS 16 “Property, Plant and Equipment”) to investment property.

Based on the above, a credit institution is obliged to transfer an object from investment property to inventory only if its purpose changes, as evidenced by the start of reconstruction of the object for the purpose of its sale. If a credit institution decides to sell an investment property without reconstructing it, it continues to record the object as investment property until it is derecognised (written off from the balance sheet), and does not record it as inventory. The same thing happens if a credit institution begins the reconstruction of an existing investment property for further use as an investment property. The property retains its status as an investment property and is not classified as an owner-occupied property during the renovation.

The recognition and measurement considerations that apply when an institution uses the fair value model for investment property should be set out. If an organization uses the historical acquisition cost model, reclassifying items

The terms “investment property”, “owner-occupied property” and “inventories” do not result in a change in the carrying amount of the items and the cost of the items for measurement and disclosure purposes. Book value is the amount at which an asset is recognized on the balance sheet.

When an investment property carried at fair value is reclassified to owner-occupied property or inventory, the initial cost of the property for subsequent accounting under IFRS 16 or IFRS 2 is its fair value at the date of change in use.

If an owner-occupied property becomes an investment property that will be measured at fair value, the credit institution should apply IFRS 16 until the date the property changes use. The difference between the carrying amount of property under IFRS 16 and its fair value as at the above date should be treated in the same way as a revaluation in accordance with IFRS 16.

Until an owner-occupied property becomes an investment property measured at fair value, the institution should continue to depreciate the property and recognize impairment losses. The difference between the carrying amount of property under IFRS 16 and its fair value as of the above date is accounted for in the same way as a revaluation in accordance with IFRS 16, i.e.:

A decrease in the carrying amount of an item is charged to net profit or loss for the period. Nevertheless, the amount of decrease within the limits of the increase in the value of the given object from revaluation is written off to the account “Increase in the value of property from revaluation”;

An increase in the carrying amount of an item is accounted for as follows:

An increase in the carrying amount of an item in an amount equal to the amount of the impairment loss for the item is charged to net profit or loss for the period. The amount of the increase allocated to net profit or loss for

period should not exceed the amount necessary to restore the carrying amount to the amount that would have been determined (less depreciation) if no impairment loss had been recognized for the item in previous years;

The remaining portion of the increase in book value is credited to the capital account “Increase in property value from revaluation.” Upon subsequent disposal of an investment property, the increase in the value of the property from revaluation included in capital may be written off to the account of retained earnings. The write-off of the value of an object from revaluation to the account of retained earnings is not reflected in the income statement.

To transfer an item from inventory to investment property, which will be carried at fair value, the difference between the item's fair value at that date and its carrying amount must be recognized in net profit or loss for the period.

The accounting procedure for transferring an object from inventory to the category of “investment property”, which will be reflected at fair value, corresponds to the accounting procedure for the sale of inventory.

When a credit institution completes construction work or reconstruction of a self-constructed investment property that will be recorded at fair value, the difference between the fair value of the property as of that date and its carrying amount should be recognized in net profit or loss for the period.

Disposal of an investment property

An investment property is derecognized (i.e. it is written off from the balance sheet) on disposal or permanent decommissioning, when no associated economic benefits are expected to flow from the disposal of the property.

The disposal of an investment property can be carried out through

sale or transfer of financial lease. To determine the date of disposal of investment property, a credit institution should be guided by the criteria for recognizing revenue from the sale of goods set out in IFRS 18 “Revenue” and take into account the relevant recommendations specified in the Appendix to this standard. The provisions of IFRS 17 Leases apply to the disposal of investment property that is under a finance lease or sold under a leaseback.

Gains or losses arising from the decommissioning or disposal of an investment property should be measured as the difference between the net proceeds on disposal and the carrying amount of the asset and recognized as income or expense in the income statement (unless otherwise stated in IFRS 17). Lease" regarding sale with leaseback).

The consideration received on disposal of an investment property is initially recognized at fair value. In particular, in the case of a deferred payment for an investment property, the consideration received is initially reflected at the price of the property when paid in cash without a deferred payment. The difference between the nominal amount of the consideration and the price of the item when paid in cash without deferred payment is recognized as interest income in accordance with IFRS 18, which is calculated on a time-proportionate basis taking into account the actual yield of the consideration receivable.

To account for liabilities remaining with a credit institution after the disposal of investment property, IAS 37 Provisions, Contingent Liabilities and Contingent Assets or the relevant provisions of other IFRSs should be applied.

Information disclosure

Information about investment properties is subject to disclosure in the notes to the financial statements in addition to the information disclosed in accordance with IFRS 17 Leases. According to IFRS 17, the owner of an investment property discloses information about the terms of an operating lease on an ad-hoc basis.

landlord position. In addition, a credit institution that manages investment property under a finance lease discloses information in respect of that finance lease from the lessee's perspective, as well as information in respect of any property under an operating lease by the company from the lessor's perspective.

A credit institution should disclose the following information:

♦ on the criteria developed by the credit institution for the purpose of distinguishing between investment property and owner-occupied property, as well as property intended for sale in the ordinary course of business, in cases where the classification of objects seems difficult;

♦ on the methods and significant assumptions used in determining the fair value of investment property (in this case it is indicated whether the basis for determining fair value was objective market information or, to a greater extent, other factors that should be disclosed due to the nature of the property and the lack of comparable market information );

♦ the extent to which the fair value of an investment property (as reflected in the financial statements or disclosed in the notes to the financial statements) is based on the valuation of an independent valuer who has a recognized and appropriate professional qualification and experience in valuing investment property of the same category and location the same territory as the property being assessed. The absence of such an estimate is disclosed in the notes to the financial statements;

♦ indicators reflected in the income statement:

Rental income from investment property;

Direct operating expenses (including repairs and routine maintenance expenses) attributable to investment property from which rental income was received during the reporting period;

Direct operating expenses (including repairs and routine maintenance expenses) attributable to investment properties that did not generate rental income during the reporting period;

The existence and extent of restrictions on the ability to sell investment property or distribute income or proceeds from disposal;

Essential obligations under a contract to purchase, construct, or renovate an investment property, or to carry out repairs, maintenance, or improvements to an investment property.

In addition to the disclosures made in the notes to the financial statements of a credit institution using the fair value model set out above, a reconciliation of the carrying amount of the investment property at the beginning of the reporting period with the carrying amount at the end of the reporting period should also be provided, indicating the following (presentation of comparable information is not required): :

Growth of investment property, separately disclosing data on its growth as a result of the acquisition of objects and as a result of capitalization of subsequent expenses;

Disposal;

Net gain or loss resulting from fair value adjustment;

Conversions of investment properties into the inventory and owner-occupied property categories and vice versa;

Other changes.

In exceptional cases, when a credit institution accounts for an investment property using the primary method of accounting in accordance with IFRS 16 Property, Plant and Equipment (due to the lack of reliable fair value), the amounts relating to this investment property should be disclosed separately in the reconciliation from the amounts related to other objects of investment property

sti. In addition, the credit institution should disclose the following information: -F- description of the investment property;

an explanation of the reasons why fair value cannot be determined with a sufficient degree of reliability;

Y*, if possible, the boundaries within which the fair value of the investment property is expected to lie;

F- upon disposal of an investment property not recorded at fair value:

♦ the fact of disposal of an investment property that is not reflected at fair value;

♦ the book value of this investment property at the time of sale;

♦ the amount of profit or loss recognized. In addition to the information disclosed in the notes to the financial statements, a credit institution using the historical acquisition cost model must also disclose information regarding:

♦ methods used to calculate depreciation;

♦ useful life of assets or depreciation rates used;

♦ total carrying amount and accumulated depreciation (together with accumulated impairment losses) at the beginning and end of the reporting period;

♦ reconciliation of the carrying amount of investment property at the beginning and end of the reporting period, indicating the following (the presentation of comparable information is not required):

Growth in investment property, disclosing separately the gains resulting from the acquisition of properties and from the capitalization of subsequent expenses;

Increase in investment property as a result of the acquisition of objects during a company merger;

Disposal;

Depreciation;

The amount of impairment losses recognized in the financial statements and the amount removed

impairment losses for the reporting period in accordance with IFRS 36 “Impairment of Assets”;

Net exchange differences arising when recalculating financial statements of foreign production;

Recognition, measurement and disclosure of information about investment property regulated by IAS 40 Investment Property. Investment property is property, such as land and buildings (maybe part of a building), or both, held by a company to generate rental income and/or appreciation.

If part of the property is used to receive rent, and the other to produce goods (work, services), then the company is obliged to account for them separately. However, if only a small portion is used for production, then the standard allows the property to be classified as investment property. Property that is leased by a parent or subsidiary company is not considered investment property, since for a group of companies it is owner-occupied property.

Investment property is recognized when it is probable that future economic benefits will flow and its value can be measured reliably.

Investment property is initially valued at actual purchase costs, which consist of the cost of the property and direct purchase costs. Subsequently, the company must determine in its accounting policies the chosen method of accounting for investment property: either at fair value or at actual costs. In this case, the selected accounting method must be applied to all investment properties.

The fair value of an item is the amount for which the item could be exchanged in a transaction between knowledgeable, willing parties in an arm's length transaction. Changes in fair value are recognized in profit or loss in the period in which they arise.

The cost model accounts for investment property at its acquisition cost less accumulated depreciation and accumulated impairment losses (if any), which is consistent with property, plant and equipment accounting.

Termination of lease agreements and conversion of property to owner-occupied properties;

The beginning of reconstruction for the purpose of sale, when transferred to inventories;

The beginning of the operating lease under the agreement.

An investment property should be derecognised when no economic benefits are expected to flow from the property. Disposal of an investment property occurs when it is sold or transferred into financial lease.

Mandatory disclosures include: the accounting model for investment property, the criteria for classifying investment property, the extent of the valuation performed by an independent appraiser, the amount of rental income from the investment property, direct operating expenses and accumulated changes in fair value.

Provides that a change in an accounting policy on an entity's own initiative is possible only if the change results in the financial statements presenting reliable and more relevant information about the effect that transactions, other events or conditions have on the entity's financial position, financial performance or cash flows . It is highly unlikely that a change from the fair value model to the cost model will result in a more appropriate presentation of information.

32 This Standard requires all entities to measure the fair value of investment property for both measurement purposes (if the entity uses the fair value model) and disclosure purposes (if the entity uses the cost model). It is encouraged, but not required, for an entity to estimate the fair value of investment property based on a valuation made by an independent valuer who has a recognized and appropriate professional qualification and recent experience in valuing property of the same category and location as the investment property being valued.

32A An organization may:

(a) select either the fair value model or the cost model for all investment property that collateralizes obligations that pay income that is directly related to fair value or to the performance of specified assets that include the investment property; And

(b) elect either the fair value model or the historical cost model for all other investment properties, regardless of the choice made in (a).

32B Some insurers and other entities manage an internal real estate fund that issues nominal units, with some units held by investors under related contracts and others held by the entity itself. The clause does not permit an entity to value properties held by the fund partly at historical cost and partly at fair value.

32C If an entity elects different models for the two categories identified in paragraph , all sales of investment property between pools of assets measured using different models shall be recognized at fair value, and the cumulative change in fair value shall be recognized in profit or loss. Therefore, if an investment property is sold from a pool that uses the fair value model to a pool that uses the cost model, the fair value of that property at the date of its sale becomes its deemed cost.

Fair value model

33 After initial recognition, an entity that elects the fair value model shall measure all of its investment properties at fair value, except as described in paragraph .

35 Gains or losses arising from changes in the fair value of investment property shall be recognized in profit or loss in the period in which they arise.

36 - 39 [Deleted]

40 When measuring the fair value of investment property in accordance with IFRS 13, an entity shall ensure that the fair value reflects, among other things, rental income from existing leases and other assumptions that market participants would use in determining the price of the investment property in current market conditions.

40A When a lessee uses the fair value model to measure investment property that is held as a right-of-use asset, it shall measure the right-of-use asset, rather than the related property, at fair value.

41 IFRS 16 specifies the basis for initial recognition of the cost of investment property held by a lessee as a right-of-use asset. The paragraph requires that, if appropriate, investment property held by a lessee as a right-of-use asset be remeasured to fair value if the entity elects the fair value model. When lease payments are made at market rates, the fair value of the investment property held by the lessee as a right-of-use asset at the time of acquisition, less all expected lease payments (including those attributable to recognized lease liabilities), should be nil . Therefore, a revaluation of a right-of-use asset from cost as determined in accordance with IFRS 16 to fair value in accordance with paragraph (subject to the requirements of paragraph 50) shall not give rise to any initial gain or loss , except when fair value is measured at different points in time. This may occur when the decision to apply the fair value model is made after initial recognition.

42 - 47 [Deleted]

48 Exceptionally, at the time an entity first acquires investment property (or when an existing property first becomes investment property following a change in its use), there is clear evidence that the range of reasonable fair value estimates will be so wide and the likelihood of different the results will be so difficult to estimate that the benefit of selecting a single measure of fair value is negated. This may indicate that the fair value of the investment property cannot be measured reliably on a continuing basis (see paragraph ).

50 When determining the carrying amount of investment property under the fair value model, an entity shall not recount assets or liabilities that are recognized as separate assets or liabilities. For example:

(a) equipment, such as elevators and air conditioning, often forms an integral part of the building and is generally included in the fair value of the related investment property rather than being recognized separately as property, plant and equipment;

(b) if a furnished office is leased, the fair value of the office generally includes the fair value of the furniture because rental income relates to the furnished office. When furniture is included in the fair value of investment property, the entity does not recognize the furniture as a separate asset;

(c)the fair value of the investment property does not include prepaid or accrued income under an operating lease because the entity recognizes it as a separate liability or asset;

(d) the fair value of investment property held by a lessee as a right-of-use asset reflects expected cash flows (including variable lease payments expected to be paid). Therefore, if the resulting valuation for a property is determined net of any payments expected to be made, then the recognized lease liability will need to be added back to arrive at the carrying amount of that investment property under the fair value model.

51 [Deleted]

52 In some cases, an entity expects that the present value of its payments related to a particular investment property (other than payments related to recognized liabilities) will exceed the present value of the related cash receipts. An entity applies IAS 37 Provisions, Contingent Liabilities and Contingent Assets to decide whether to recognize a liability and, if so, how to measure it.

Inability to measure fair value reliably

53 There is a rebuttable presumption that an entity has the ability to measure reliably the fair value of an investment property on a continuing basis. However, in exceptional cases, it may be that when an entity first acquires investment property (or when an existing property first becomes investment property due to a change in its use), there is clear evidence that the fair value of the investment property cannot be measured reliably over a period of time. basis. This situation arises if and only if the market for comparable properties is inactive (for example, there have been few recent transactions, price quotes are not current, or observed transaction prices indicate that the seller has been forced to sell) and alternative reliable There are no fair value estimates (eg based on discounted cash flow projections). If an entity concludes that the fair value of an investment property under construction cannot be measured reliably, but expects that the fair value of the investment property can be measured reliably upon completion of construction, the entity shall measure the investment property under construction at cost until either its fair value will no longer be reliably measurable or construction will not be completed (whichever occurs first). If an entity concludes that the fair value of investment property (other than investment property under construction) cannot be measured reliably on a continuing basis, the entity shall measure that investment property using the cost model in accordance with IAS 16 for investment property. owned, or in accordance with IFRS 16 in the case of investment property held by the lessee as a right-of-use asset. The liquidation value of such investment property should be assumed to be zero. An entity shall continue to apply IAS 16 or IFRS 16 until the investment property is disposed of.

53A Once an entity can reliably measure the fair value of an investment property under construction that was previously measured at cost, it shall measure the property at fair value. It is assumed that a reliable estimate of fair value will be possible upon completion of such properties. If this is not true, the paragraph requires that the property be accounted for using the cost model in accordance with IAS 16 for owned assets, or in accordance with IFRS 16 for investment property. held by the lessee as a right-of-use asset.

53B An assumption that the fair value of an investment property under construction can be measured reliably can only be rebutted at initial recognition. An entity that has measured an investment property under construction at fair value cannot conclude that the fair value of the completed investment property cannot be measured reliably.

54 In exceptional cases where, for the reasons specified in paragraph , an entity is forced to measure investment property using the cost model in IAS 16 or IFRS 16, it measures all other investment property at fair value. including investment properties under construction. In such cases, although an entity may use the cost model for one investment property, it must continue to account for each of the remaining properties using the fair value model.

55 If an entity previously measured an investment property at fair value, it shall continue to measure that property at fair value until it is disposed of (or until the property becomes owner-occupied property or the entity begins to develop the property for subsequent sale in the ordinary course of business), even if comparable market transactions become less frequent or market prices become less available.

Historical cost accounting model

56 After initial recognition, an entity that elects the cost model shall measure investment property:

(a) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations if it meets the criteria to be classified as held for sale (or is included in a disposal group classified as held for sale);

(b) in accordance with IFRS 16, if it is held by the lessee as a right-of-use asset and is not held for sale in accordance with IFRS 5; And

(c)as required in IAS 16 for the cost model in all other cases.

Investment property is an investment in real estate that is not intended to be used in the business of the entity or for sale in the ordinary course of business. It includes land plots, buildings or parts of buildings that are at the disposal of the owner or tenant under a financial lease (leasing) agreement, used to receive rental payments, income from the increase in property value, but not involved in the process of production and sale of goods, work, services ; not used for administrative purposes; not intended for sale in the normal operations of the organization.

Reclassification of objects of investment value, that is, their inclusion in or exclusion from this category is made according to the actual purpose of a particular item of property of the organization.

Converting a property from an investment property to a property for sale is carried out with the beginning of its reconstruction in preparation for sale. But if a decision is made to sell an investment property without reconstruction, it continues to be included in the investment property until it is disposed of as a result of the sale.

The object is included in investment property:

after completion of construction or reconstruction;

after the end of its use in production, management, commercial operations;

after transferring the operating lease to a third party.

An object is excluded from investment property:

with the beginning of its use in production, management or commercial operations;

with the beginning of reconstruction as a preparatory pre-sale operation.

Recognition and initial assessment. As part of the organization's assets, investment property is recognized as an independent accounting object when there is a sufficient probability of receipt of lease payments or an increase in the value of capital in accordance with the requirements for investment property, and the value of the latter can be reliably determined.

The initial valuation of investment property is made at the cost of its acquisition or construction, not excluding construction by economic means.

The cost of acquiring investment value includes the price of the object and direct costs of the transaction (legal, consulting services, registration, etc.). Interest for deferred payment is not included in the cost price; they are included in periodic expenses during the term of the loan. Facilities built by contractors are valued in accordance with the contract price.

The cost of investment property built economically is determined by the sum of all costs on the date of completion of construction of the facility. Costs of unfinished projects are taken into account like any other costs of capital construction. Separate accounting for investment property begins on the date of completion of construction and acceptance of the property into operation.

The cost of excess consumption of materials and other resources consumed during the construction or reconstruction of objects is not included in their initial cost. Expenses associated with the commissioning of an investment property are not included in its cost, with the exception of those expenses that are necessary to bring the object into working condition. But initial losses associated with temporary difficulties in attracting tenants and other similar losses are written off as expenses for the reporting periods in which they arose.

Subsequent additional expenses are charged to increase the carrying amount of the investment property if they increase the profitability of the investment property. In all cases where losses in profitability are reflected in the original price of an asset, their recovery through modernization or other subsequent expenses should be reflected in an increase in the book value of the asset. Other subsequent expenses are not capitalized. They should be written off as expenses for the period in which they arose.

Models for subsequent assessment of the value of investment property. IAS-40 allows the following to be used for accounting for investment property: fair value, and its changes are reflected in profit and loss; initial purchase price, in which investment property is shown on the balance sheet at its residual value, that is, less accumulated depreciation and impairment losses. The use of historical acquisition cost does not eliminate the need to disclose the fair value of investment property in the notes to the financial statements.

This model differs from revaluation accounting, which is commonly used to account for tangible assets, in that the excess of the revalued value over the original carrying amount is recognized in capital accounts as an increase in the value of the property. The fair value model assumes that all changes in value are recognized in profit or loss accounts only.

The difficulties of determining fair value for many objects of investment value are also obvious. The fair value of investment property should reflect market conditions and actual market and other conditions at the reporting date and not at any other date. Changing market conditions lead to changes and uncertainties in fair value measurements. For many investment properties, it is impossible to rely on active market prices; tariff factors of rent also influence them.

Each organization is obliged to apply the chosen valuation procedure for all investment properties. Often, for objective reasons, it is impossible to ensure that all existing assets are assessed at fair value.

Reclassification is measured using one of two models: historical cost or fair value. When measured at historical cost, any reclassification of investment property does not cause any change in its carrying amount and therefore does not require any accounting for variances. On the contrary, when valuing investment property at fair value, deviations arise that require accounting and reporting in financial statements.

Reclassification of investment property into property, plant and equipment, inventory or other categories of “owner-occupied property” is made at fair value, which is recognized as the carrying amount of the items when their use in the entity changes.

Disposal of investment property occurs through their sale or financial lease under a leasing agreement. The sale price of an object is determined by its fair value at the date of alienation. When providing a commercial loan or installment payment plan, the difference between the actual consideration and the fair value (price) is recorded separately as interest income received. The resulting profits (losses) are reflected in the profit and loss account.

Upon final decommissioning (write-off) of an object of investment value, the possible amount of losses is reflected as a loss in the reporting period in which the write-off of the object was recorded.