What is Investment Property?
Investment property under IAS 40 is land or a building, or part of a building, held by an entity to earn rentals, for capital appreciation, or both — rather than for use in operations or sale in the ordinary course of business.
How It Works
- Classify the property as investment property based on its intended use.
- Measure it initially at cost, including transaction costs.
- Choose between the cost model and the fair value model as accounting policy.
- Under the cost model, depreciate the property and test it for impairment.
- Under the fair value model, re-measure to fair value each period and recognise changes in profit or loss.
Saudi Context
Saudi real estate developers, REITs, and large family offices hold material investment property portfolios. SOCPA-adopted IAS 40 allows either measurement model, and ZATCA accepts both for income tax and zakat as long as the policy is consistent.
Example
A REIT owns an office building with a fair value of SAR 200M (up from SAR 180M last year). Under the fair value model, it recognises SAR 20M of unrealised gain in profit or loss.