On July 14, the FASB tentatively decided to expose a revised version of IAS 40, Investment Properties, as a proposed Accounting Standards Update (ASU). The guidance in the proposed ASU would generally be consistent with that in IAS 40 except that it would require that investment properties be measured at fair value through earnings rather than providing an option, as IAS 40 currently does. Current U.S. GAAP do not provide an option to measure investment properties at fair value.

The proposed ASU defines investment properties as “property (land or a building — or part of a building — or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business.”

The investment properties project was necessary because of a decision made by the FASB and IASB in their joint leasing project. The boards had tentatively decided that the proposed new lessor accounting would not apply to investment properties measured at fair value. Because U.S. GAAP did not allow this option, the FASB added this project to its agenda to converge this aspect of IFRSs and U.S. GAAP.

The issuance of the proposed and final ASUs is expected to coincide with the timing of the leasing project.

For more information about the investment properties project, see the project page on the FASB’s Web site.