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Property that is being constructed or developed for use as an
investment property (IAS 16 currently applies until the property is
ready for use, at which time IAS 40 starts to apply)Can you please clarify this single line, i mean how it actually works (IAS 16 currently applies until the property is READY FOR USE)
The construction is yet not completed, we know future economic benefits will flow the entity but the cost cannot be measured reliably so how can we apply IAS 16?
Hi,
It is essentially setting out the rules for capitalising the cost of the asset, in that we capitalise the amounts paid plus any directly attributable costs of bring the asset into the workable condition as intended, as in IAS 16. Once complete the item then has a cost that is then used as the starting cost for your investment property, if that is its usage.
If it is property that you will not hold for investment purposes and instead will occupy it for your own purposes then once the property is ready to use (i.e. finished/fitted out) then you will begin to depreciate it.
Thanks
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