Sample Disclosure – Accounting Policy Of Investment Properties (19 January 2011)
Investment properties are held for long term rental yields or for capital appreciation or both, and are not occupied by companies within the Group.
Investment properties are measured initially at cost. After initial recognition, investment properties are measured and carried at fair value.
Fair value is based on valuation performed by appointed independent registered valuer(s) taking into account factors such as the property growth and market in the surrounding area. The fair value of the investment properties reflects the market conditions at the balance sheet date. Changes in fair values are recorded in the income statement as investment properties fair value adjustment.
On disposal of an investment property, or when it is permanently withdrawn from use and future economic benefits no longer are expected from the property concerned, it shall be derecognised. The difference between the net disposal proceeds and the carrying value is recognised in the income statement in the period of the retirement or disposal.
Transfer to or from investment property will be made when there is a change in use of the property. The commencement of owner-occupation for the property would result in a transfer of the investment property to self-occupied property, included in category of asset named “Property, Plant and Equipment”. On the other hand, the end of owner-occupation of a property would result in a transfer from the self-occupied property which is included in Property, Plant and Equipment to the category of asset known as “Investment Properties”.
If a self-occupied property became an investment property that will be carried at fair value, the revaluation surplus of the self-occupied property, included in Asset Revaluation Reserve account would be transferred to accumulated profits.
For a transfer from investment property which is carried at fair value to self-occupied property, the fair value of the property at the date of change in use would be treated as deemed cost of the property for subsequent accounting purposes.
For the transfer of investment property to prepaid lease payments, the Group have adopted the transitional provision stated in Para 67A of FRS 117 which allows the Group to retain the unamortised revalued amount of the property as the surrogate carrying amount of prepaid lease payments.