Revaluation of the Investment Property at a Subsequent Date Under Ind AS 40

Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, rather than for:

(a) Use in the production or supply of goods or services or for administrative purposes; or

(b) Sale in the ordinary course of business.

Para 56 of Ind AS 40, Investment Property, requires that after initial recognition, an entity shall measure investment property in accordance with the requirements in Ind AS 16 for cost model in cases other than Ind AS 105 and Ind AS 116.

This standard also requires all entities to measure the fair value of investment property, for the purpose of disclosure even though they are required to follow the cost model. An entity is encouraged, but not required, to measure the fair value of investment property on the basis of a valuation by an independent valuer who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued.

On a combined reading of the above provisions, an entity is required to measure the fair value of the building only for disclosure purposes. This story will take you through a case study on how to treat the revaluation of the investment property at a date other than initial recognition.

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