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IASB finalises amendments to IAS 40 regarding transfers of investment property

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08 Dec 2016

The International Accounting Standards Board (IASB) has published 'Transfers of Investment Property (Amendments to IAS 40)' to clarify transfers of property to, or from, investment property.

 

Background

The IFRS Interpretations Committee received a request for clarification of the application of paragraph 57 of IAS 40 Investment Property, which provides guidance on transfers to, or from, investment properties. More specifically, the question was whether a property under construction or development that was previously classified as inventory could be transferred to investment property when there was an evident change in use.

The Interpretations Committee referred the matter to the IASB, and at its April 2015 meeting, the IASB agreed to amend the paragraph to reinforce the principle for transfers into, or out of, investment property in IAS 40 to specify that such a transfer should only be made when there has been a change in use of the property. The proposals in the exposure draft published in November 2015 have now been finalised.

 

Changes

The amendments in Transfers of Investment Property (Amendments to IAS 40) are:

  • Paragraph 57 has been amended to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
  • The list of evidence in paragraph 57(a) – (d) was designated as non-exhaustive list of examples instead of the previous exhaustive list.

 

Effective date and transition requirements

The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted. An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.

 

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