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Why is it that investment properties measured using the fair value model under IAS 40 are not depreciated, while property, plant, and equipment using the revaluation model under IAS 16 are depreciated, even though both methods adjust the carrying amount to fair value?
Hi,
Good question. It is due to the reason behind the purchase being for investment purposes and to make it equivalent to the treatment of a purchase of shares (another type of investment). If we decide to invest our money in property as opposed to buying shares then we should have the same method of accounting to aid the users of accounts. Both measured at FV with gains/losses to profit or loss.
Hope that helps.
Thanks
Hi,
Good question. It is due to the reason behind the purchase being for investment purposes and to make it equivalent to the treatment of a purchase of shares (another type of investment). If we decide to invest our money in property as opposed to buying shares then we should have the same method of accounting to aid the users of accounts. Both measured at FV with gains/losses to profit or loss.
Hope that helps.
Thanks
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