Recent changes to AASB 140 Investment Property effected by AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments could make it easier for entities to transfer properties into, and out of, the investment property category in the balance sheet.
Currently, AASB 140 only permits transfers when (and only when) there has been a ‘change in use’ of the property, which must be evidenced by certain events stipulated in paragraph 57. These are:
Type of transfer|
Investment property → owner-occupied property (PPE)|
Owner occupation started|
Investment property → inventories|
Development started, with a view to sale|
PPE (owner occupied) → investment property|
End of owner occupation|
Inventories → investment property|
Commencement of operating lease to another party|
In December 2016, the International Accounting Standards Board (IASB) published amendments to paragraph 57 of IAS 40 (AASB 140 in Australia) to clarify that ‘change in use’ is not limited to the situations specified in the table above. Instead of being an exhaustive list of indicators, the amendments confirm that the above indicators are merely examples of evidence of ‘change in use’.
Two additional examples have been added to the list to deal with cases of ‘change in use’ for properties under construction or development:
Properties under construction or development|
Type of transfer|
Investment property → owner-occupied property (PPE)
Development with a view to owner occupation. For example, a transfer might occur when the lease is terminated and there are firm plans in place for redevelopment that suits the client's specific needs.
Inventories → investment property
Inception of operating lease to another party
The amendments also confirm that ‘change in use’ only occurs when:
A change in management’s intention for the use of the property by itself does not provide evidence of a ‘change in use’.
Type of entity|
Annual periods beginning on or after 1 January 2018|
Annual periods beginning on or after 1 January 2019|
All types of entities can adopt these changes early, but must disclose that fact.
At the date of initial application (beginning of the annual reporting period in which the entity first applies these amendments) entities will need to reassess the classification as PPE, inventories or investment property and reclassify if appropriate.
Entities can choose to apply the changes retrospectively, but only if it is possible to do so without using hindsight.