International Accounting Standard 40
The International Accounting Standard 40 ( IAS 40 ) is an accounting standard of the IASB and regulates the accounting of real estate held as a financial investment, so-called investment properties .
IAS 40 includes assets such as real estate or real estate that are held as financial investments, for example to generate rental income. Investment property does not include any tangible assets that are used in operational business, such as production, services or administration, or that are held for sale in the ordinary course of business. The accounting for such property, plant and equipment is regulated in IAS 16 .
Initial assessment
Investment properties are initially valued at acquisition or production costs (including any transaction costs). The initial valuation is therefore identical to the initial valuation of "normal" property, plant and equipment according to IAS 16.
Follow-up evaluation
In addition to ordinary fixed assets, which are generally amortized over their useful life according to plan, investment properties can alternatively at fair value ( fair value are measured). The fair value model of IAS 40 differs conceptually from the revaluation method permitted under IAS 16 . With the fair value model, gains and losses resulting from the new valuation must be recognized immediately in the income statement . With the revaluation model according to IAS 16, profits are to be allocated to a revaluation reserve within equity.
The option codified in IAS 40.30 between valuation at amortized cost or production cost and valuation at fair value must be exercised uniformly for all investment properties. A change of method may only be carried out if the change improves the insight into the asset, financial and earnings situation. It is considered unlikely that a change from the so-called fair value model to the cost model will improve the insight, so that a change will generally only be possible from the cost model to the fair value model. This change must be applied to the entire portfolio of investment properties.
Critical consideration
The fair value valuation of investment properties leads to the illusion of property companies that hold real estate holdings that the balance sheet value of the equity would reflect the value of the equity. In fact, the determination of the market values in the context of real estate valuation is carried out on the basis of other assumptions than company valuations. If, in practical applications, the assumptions taken into account in the company valuation of a property company holding an inventory are compared with the assumptions on which the real estate valuation of the investment properties is based, then T. considerable deviations. This problem can also affect the z. This partly explains the considerable differences between the net asset value of a listed property company and the market capitalization.
The fair value must be the value that could be achieved on the market on the balance sheet date. The costs of the sale are not taken into account. The changes in value resulting from the subsequent valuation are immediately recognized in profit or loss.
