This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IAS 40 and long-term leases of land

  • News default Image

10 Sep 2001

As a result of IAS 40, Investment Property, Hong Kong Land Company, which prepares IAS financial statements, has switched to a cost/depreciation reporting model for investment properties from its prior full fair value model.

IAS 40, in combination with IAS 17.11, prohibits the revaluation of leased land. The effect of the change was to eliminate US$4.2 billion (81%) of shareholders' equity at 31 December 2000. In Hong Kong (and elsewhere, including China) nearly all land is leased from the government under long-term leases rather than owned outright. Hong Kong Land says it cannot reliably value the buildings apart from the land. In its first-half 2001 financial report, Hong Kong Land presented, in addition to its primary cost/depreciation model financial statements, supplementary financial information prepared "in accordance with IAS as modified by the revaluation of leasehold properties", with value changes reported in net profit or loss. This method increased net profit for 2000 from US$0.3 billion to US$2.2 billion. Revaluation of long leases of land was an issue considered by the IASC in developing IAS 40, but IASC concluded that it should reconsider IAS 17.11 separately and not as part of the investment property project. Click for Link to Hong Kong Land Website. IASB has indicated that it will be addressing long leases of land as part of its Improvements Project.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.