Ind AS 40 Investment Property

Not only Investment properties, everything is measured at cost first. Then subsequent treatment is revaluation method where applicable. If you observe the number of things that you purchase or owe, it is always recognised initially at cost. Eg. If you purchased investment property at market value, it is recognised at cost. Then it is revalued in the later years. The revaluation policy could be for a year, two years or so on. If a company chooses cost method for subsequent years, it’s cost less depreciation less impairment,

Now I think you can guess which is important, Revaluation gain. That is why people follow this method. If the business is operating in a high inflationary economy, where fair values of assets reduce, no market for sale or highly volatile, people choose cost method because incurring revaluation losses consistently will reduce reserves and surpluses.

Forgot to mention, fairvalue method is disclosed. One has to follow IndAS 16 PPE revaluation method  for IndAS 40.

Sorry to disagree, but the thing is when it comes to Investment Property i.e Ind AS 40. We have NO CHOICE than to measure at Cost Model. Fair Value is only to be disclosed in notes to accounts. It is not brought in Balance sheet. This same you can cross check by reading Para number 30 of Ind AS 40.

Secondly, if you read the wording of Ind AS 16 on PPE they clearly give A CHOICE of either revaluation model or cost model. The choice is on us.

So by my original question I meant to ask what could be the possible reason that ONLY Cost Model is permitted for measuring Investment Property ?

Please tell me if I am going wrong anywhere.

Measurement subsequent to initial recognition

IAS 40 permits entities to choose between: [IAS 40.30]

• a fair value model, and
•  
• a cost model.

Reasons: India might not be having an active market and economic growth to revalue its investment properties as per fair value method. Per say, if this my rebuttable assumption, all active markets will follow this assumption that there is no secondary market. This is because there is no secondary market here. Due to this, capital appreciation is low or might fall below carrying value leading to loss. This will reduce the equity ownership interests in assets when the assets value decreases.

SPLOCI-PL

To Asset value

Next, another purpose why investment properties is used is for rentals. These fair value changes will reflect in the rentals (Para 40). These complexities can be avoided if IndAS 40 will omit Revaluation model because of its measurement complexities as, once FV method is adopted, it has to consistently follow it through out its useful life with few exceptions in policy changes. This could be detrimental.

Because of this, Cost method is lesser complex and will recover the right gains in the advent of held for sale and more consistency.

Okay, Totally Agreed !
Seems logical now.
Thanks a lot for your efforts. 😃