Difference between PPE and INVESTMENT PROPERTY

This topic has 3 replies, 2 voices, and was last updated 7 years ago by P2-D2.

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September 3, 2018 at 9:39 pm #471140
Anna
Participant
- Topics: 31
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Hi,

PPE is defined as” tangible assets that: are held […] for rental to others […]” while IP is defined as ” property held to earn rentals […]”. Could somebody explain please what is the difference between these two expressions – RENTAL TO OTHERS and TO EARN RENTALS? The remaining parts of both definitions are clear to me. Thank you!
September 4, 2018 at 8:26 pm #471415
P2-D2
Keymaster
- Topics: 4
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Hi,

Investment property specifically relates to land and buildings, whereas other items such as motor vehicles could be held for rentals to others under an operating lease and still remain in our accounts as PPE.

At this level just ensure that you’re happy with IP relating land and buildings and don’t worry too much about this tiny other part of PPE.

Thanks
September 5, 2018 at 10:48 pm #471726
Anna
Participant
- Topics: 31
- Replies: 15
Hi,

So the building (or land) can be classified either under IAS16 as PPE (building/land held for rental to others) or under IAS 40 as IP (building/land held to earn rentals)?

Thank you
September 7, 2018 at 8:24 pm #472200
P2-D2
Keymaster
- Topics: 4
- Replies: 7235
Hi,

It will be IAS16 if it is used in the business operations and IAS 40 if it is rented out under an operating lease.

Thanks
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