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Good afternoon,
Struggling to grasp investment property at the moment.
Revaluations to investment property go through the SPL and hence included in Net Income? So does this then effect retained earnings or should a separate reserve still be kept as with PPE revalutions to reflect that the revaluation is not distributable?
Also where would a fair value gain on investment property be shown within the SPL? there doesn’t seem to be an obvious section to reflect this.
Thanks
Hi,
If you think of IP as an alternative investment to investing in shares then it makes more sense.
Yes, gains/losses on IP go through profit or loss, similar to what would happen for a FVTPL investment in shares. As the change in fair value has gone through profit or loss it will therefore go through retained earnings and so we will not be required to set up a separate reserve.
As the gain/loss comes from an investing activity I’d be inclined to show it as part of investment income within the SPL.
Thanks
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