IAS 40 — Transfers of investment property

Date recorded:


The Exposure Draft ED/2015/9 Transfers of Investment Property (proposed amendments to IAS 40) (the ‘ED’) was published in November 2015 to clarify the application of paragraph 57 of IAS 40 Investment Property, which specifies the conditions for when a property is reclassified to, or from, investment property.

The objective of this session was to discuss: (i) the staff analysis of the comment letters received; (ii) staff recommendations and (iii) whether to proceed with the amendments. The agenda paper includes a summary of the issue and the proposed amendment to IAS 40 as set out in the ED. The amendments will require that transfers of property to or from investment property should be supported by evidence that a change in use has occurred.

Comment letter analysis

The staff paper presents the analysis for each of the questions proposed in the ED as follows:

Question 1- reinforce the principle for transfers of investment property. The staff indicates that the majority of respondents agreed with the ED. However, a number of issues were raised by respondents.

  • Issue 1: clarify if management’s ‘intended’ use of a property provides evidence that is sufficient to support a change in use of property under construction or development: The staff concluded that management’s intentions alone, do not provide evidence that is sufficient to support a change in use. The staff proposes to make this clear in the amendments.
  • Issue 2: add examples of the type of evidence required to support a change in use of property under construction or development: The staff considers that the focus of the amendments is to clarify the principle. However, the staff agrees with modifying some of the examples to specifically address cases of property under development. 
  • Issue 3: consider clarifying what provides substantive evidence of a change in use: The staff considers that entities should use judgement and assess all relevant facts and circumstances. The staff does not recommend defining what provides evidence of a change in use.
  • Issue 4: clarify the circumstances in which investment property can be transferred to inventories: The staff does not recommend changing the proposals to specifically address this scenario. This is because the proposed amendments already clarify that the list of examples in paragraph 57 of IAS 40 is not exhaustive.
  • Issue 5: clarify whether the requirements in paragraph 57 of IAS 40 also apply to temporary transfers of property: The staff does not recommend addressing specifically temporary transfers.
  • Issue 6: redefine the principle for transfers to, or from, investment property: The issue noted by respondents is that the amendments should provide specific requirements to support the change. The staff considers that the requirements in paragraph 57 of IAS 40 are consistent with the requirements in relevant IFRS Standards.

Question 2- Transition: The staff indicates that the majority of respondents agreed with the proposed transitions. However, some respondents noted that it might not be possible to apply the amendments without the use of hindsight. Accordingly, the staff proposes to permit an entity to apply the amendments prospectively.

Staff recommendation

The staff recommended finalising the amendments with consideration of the changes necessary to address the responses received. Appendix A of the agenda paper includes the revised proposed amendments.


The Interpretations Committee agreed with the staff recommendations. No significant comments were raised. The Interpretations Committee approved recommending the Board to proceed with issuing the amendments of IAS 40.


In relation to each of the specific topics discussed, the following comments were made:

a) Issue 1: no significant comments

b) Issue 2: There was general agreement with the staff recommendations. However, there were some concerns in relation to whether the example for a development of a property with a view of sale for a transfer of investment property to inventories provided sufficient evidence. Particularly, whether the term “view” would be similar to management intent. The staff indicated that there would always be a question of judgement; it would be, in general, entity-specific. Nevertheless, the staff would analyse the example further to consider this concern.

c) Issue 3, 4, 5 and 6: no comments were raised.

d) Issue 7: transition. In this area there was a debate on the following issues (i) there were concerns about the staff rationale that the amounts recorded would be unaffected by the transition approach; (ii) if entities were to apply prospective application, then entities would have comparative amounts with items that were not recognised for properly.

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