INVESTMENT PROPERTY

Investment Property
is land and/or building held for rentals or capital appreciation. It
is not held for use in the production or supply of goods or services, for
administrative purposes, or sale in the ordinary course of business
Example of Invesment Property
• Land held for long-term capital appreciation rather
than for short-term sale in the ordinary course of
operations
• Land currently undetermined future use,
• A building owned by the entity (or held by the entity
under finance lease) and leased out under one or more
operating leases on commercial basis
• A building that is vacant but is held to be leased out
under one or more operating leases on a commercial
basis to external parties;
• Property that is being constructed or developed for
future use as investment property; and
• Significant portion of a property that is held to earn
rentals or for capital appreciation rather than to
provide services, and insignificant portion that is
held for use in the production or supply of goods or
services or for administrative purposes.
Items not considered as Investment
Property
• Biological assest related to agricultural activiy
• Mineral rights and mineral reserves such as oil,
natural gas and similar non-regenerative resources
• Property held for sale in the ordinary course of
operation or in the process of construction or
development for such sale
• Property being constructed or developed on behalf
of third parties;
• Owner Occupied property
• Property that is leased to another entity under a
finance lease;
• Property held to provide a social service and which
also generates cash inflows
• Property held for strategic purpose
• Property held for use in the production or supply of
goods or services or for administrative purposes
Modes of Acquisition
Cash purchase
the cost of an investment property required
through cash purchase comprises the purchase price
and any direct costs necessary in bringing the asset
to its intended conditions, e.g., professional fees foe
legal services and property transfer.
Example:
Entity A purchases land to be held for capital
appreciation for P1000,000. A pays P80,000 for legal
services and transfer taxes related to the acquisition.

Investment Property, Land 1000,000

Cash Modified Disbursement
System (MDS), Regular 1000,000
To recognize the purchase
of investment property
Installment purchase
the cost of an investment property acquired
through installment purchase is the cash price
equivalent . The difference between this amount and
the total payments is recognized as interest expense
over the period of credit.

Non-exchange transaction
the cost of an investment property acquired
through a non-exchange transaction is the fair value
at the acquisition date.