AASB 140 - Investment Property - August 2015

AASB 140 prescribes the accounting treatment and disclosure requirements for investment property, defined as land or buildings (or parts of them) held to earn rentals or for capital appreciation rather than for use in production/supply or for sale in the ordinary course of business (paragraphs 1, 5, 7). The Standard requires entities to classify property, recognise property as an asset only when future economic benefits are probable and cost is reliably measurable (paragraph 16), and to measure investment property initially at cost (paragraph 20) with specific rules for exchanges, deferred payments and not‑for‑profit initial measurement (paragraphs 24, 27-29, Aus20.1). After initial recognition entities must adopt either the fair value model or the cost model and apply that policy to all investment property, subject to narrow exceptions (paragraphs 30-32A). Under the fair value model all investment property is measured at fair value and gains or losses from changes in fair value are recognised in profit or loss (paragraphs 33, 35). Under the cost model, measurement follows AASB 116 or AASB 16 as relevant (paragraph 56), but fair value must still be measured for disclosure purposes (paragraphs 32, 79(e)).

The Standard integrates with AASB 16 Leases by explicitly bringing right‑of‑use assets that meet the definition of investment property into scope and prescribing initial recognition and subsequent measurement interplay with lease liabilities and AASB 16 (paragraphs 5, 19A, 29A, 40A-41, 50). It sets rules for transfers between investment property, owner‑occupied property and inventories, requiring a change in use with objective evidence rather than mere intention (paragraphs 57-58). For exceptional cases where fair value cannot be reliably measured on a continuing basis (eg inactive markets), there is a rebuttable presumption that fair value is measurable; if rebutted an entity must apply the cost model for that property until disposal (paragraphs 53-54). Disclosure obligations are substantial and differ by model, including reconciliation of carrying amounts, rental income, direct operating expenses, and the extent of independent valuer involvement (paragraphs 74-79). Appendix A provides simplified disclosures for Tier 2 entities (AusA1).

Compiled AASB Standard	AASB 140

Investment Property

This compiled Standard applies to annual periods beginning on or after 1 January 2023. Earlier application is permitted for annual periods beginning on or after 1 January 2014 but before 1 January 2023. It incorporates relevant amendments made up to and including 15 December 2022.

Prepared on 6 April 2023 by the staff of the Australian Accounting Standards Board.

Compilation no. 7

Compilation date: 31 December 2022

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Contents

COMPARISON WITH IAS 40

ACCOUNTING STANDARD

AASB 140 INVESTMENT PROPERTY

from paragraph

Objective 1

Scope 2

Definitions 5

Classification of property as investment property or owner-occupied property 6

Recognition 16

Measurement at recognition 20

Measurement after recognition

Accounting policy 30

Fair value model 33

Inability to measure fair value reliably 53

Cost model 56

Transfers 57

Disposals 66

Disclosure

Fair value model and cost model 74

Fair value model 76

Cost model 79

Transitional provisions

Business Combinations 84A

AASB 16 84B

Transfers of investment property 84C

Effective date 85

Withdrawal of IAS 40 (2000)

Commencement of the legislative instrument

Withdrawal of AASB pronouncements Aus86.2

AppendiX

A Australian simplified disclosures for Tier 2 entities

COMPILATION DETAILS

Deleted IAS 40 Text

AVailable on the AASB website

Basis for Conclusions on IAS 40

Australian Accounting Standard AASB 140 Investment Property (as amended) is set out in paragraphs 1 – Aus86.2 and Appendix A. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. AASB 140 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

Comparison with IAS 40

AASB 140 Investment Property as amended incorporates IAS 40 Investment Property as issued and amended by the International Accounting Standards Board (IASB). Australian‑specific paragraphs (which are not included in IAS 40) are identified with the prefix “Aus”. Paragraphs that apply only to not-for-profit entities begin by identifying their limited applicability.

Tier 1

For-profit entities complying with AASB 140 also comply with IAS 40.

Not-for-profit entities’ compliance with IAS 40 will depend on whether any “Aus” paragraphs that specifically apply to not-for-profit entities provide additional guidance or contain applicable requirements that are inconsistent with IAS 40.

Tier 2

Entities preparing general purpose financial statements under Australian Accounting Standards – Simplified Disclosures (Tier 2) will not be in compliance with IFRS Standards.

AASB 1053 Application of Tiers of Australian Accounting Standards explains the two tiers of reporting requirements.

Accounting Standard AASB 140

The Australian Accounting Standards Board made Accounting Standard AASB 140 Investment Property under section 334 of the Corporations Act 2001 on 14 August 2015.

This compiled version of AASB 140 applies to annual periods beginning on or after 1 January 2023. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 15 December 2022 (see Compilation Details).

Accounting Standard AASB 140

Investment Property

Objective

1 The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.

AusCF1 AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Scope

2 This Standard shall be applied in the recognition, measurement and disclosure of investment property.
3 \[Deleted\]
4 This Standard does not apply to:
(a) biological assets related to agricultural activity (see AASB 141 Agriculture and AASB 116 Property, Plant and Equipment); and
(b) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.

Definitions

5 The following terms are used in this Standard with the meanings specified:
Carrying amount is the amount at which an asset is recognised in the statement of financial position.
Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Standards, eg AASB 2 Share-based Payment.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See AASB 13 Fair Value Measurement).
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, rather than for:
(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.
Owner-occupied property is property held (by the owner or by the lessee as a right-of-use asset) for use in the production or supply of goods or services or for administrative purposes.

Classification of property as investment property or owner-occupied property

6 \[Deleted\]
7 Investment property is held to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows largely independently of the other assets held by an entity. This distinguishes investment property from owner-occupied property. The production or supply of goods or services (or the use of property for administrative purposes) generates cash flows that are attributable not only to property, but also to other assets used in the production or supply process. AASB 116 applies to owned owner-occupied property and AASB 16 Leases applies to owner-occupied property held by a lessee as a right-of-use asset.
8 The following are examples of investment property:
(a) land held for long-term capital appreciation rather than for short-term sale in the ordinary course of business.
(b) land held for a currently undetermined future use. (If an entity has not determined that it will use the land as owner-occupied property or for short-term sale in the ordinary course of business, the land is regarded as held for capital appreciation.)
(c) a building owned by the entity (or a right-of-use asset relating to a building held by the entity) and leased out under one or more operating leases.
(d) a building that is vacant but is held to be leased out under one or more operating leases.
(e) property that is being constructed or developed for future use as investment property.
9 The following are examples of items that are not investment property and are therefore outside the scope of this Standard:
(a) property intended for sale in the ordinary course of business or in the process of construction or development for such sale (see AASB 102 Inventories), for example, property acquired exclusively with a view to subsequent disposal in the near future or for development and resale.
(b) \[deleted\]
(c) owner-occupied property (see AASB 116 and AASB 16), including (among other things) property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees (whether or not the employees pay rent at market rates) and owner-occupied property awaiting disposal.
(d) \[deleted\]
(e) property that is leased to another entity under a finance lease.

Aus9.1 In respect of not-for-profit entities, property may be held to meet service delivery objectives rather than to earn rental or for capital appreciation. In such situations the property will not meet the definition of investment property and will be accounted for under AASB 116, for example:

(a) property held for strategic purposes; and
(b) property held to provide a social service, including those which generate cash inflows where the rental revenue is incidental to the purpose for holding the property.
10 Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), an entity accounts for the portions separately. If the portions could not be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.
11 In some cases, an entity provides ancillary services to the occupants of a property it holds. An entity treats such a property as investment property if the services are insignificant to the arrangement as a whole. An example is when the owner of an office building provides security and maintenance services to the lessees who occupy the building.
12 In other cases, the services provided are significant. For example, if an entity owns and manages a hotel, services provided to guests are significant to the arrangement as a whole. Therefore, an owner-managed hotel is owner-occupied property, rather than investment property.
13 It may be difficult to determine whether ancillary services are so significant that a property does not qualify as investment property. For example, the owner of a hotel sometimes transfers some responsibilities to third parties under a management contract. The terms of such contracts vary widely. At one end of the spectrum, the owner’s position may, in substance, be that of a passive investor. At the other end of the spectrum, the owner may simply have outsourced day-to-day functions while retaining significant exposure to variation in the cash flows generated by the operations of the hotel.
14 Judgement is needed to determine whether a property qualifies as investment property. An entity develops criteria so that it can exercise that judgement consistently in accordance with the definition of investment property and with the related guidance in paragraphs 7–13. Paragraph 75(c) requires an entity to disclose these criteria when classification is difficult.
14A Judgement is also needed to determine whether the acquisition of investment property is the acquisition of an asset or a group of assets or a business combination within the scope of AASB 3 Business Combinations. Reference should be made to AASB 3 to determine whether it is a business combination. The discussion in paragraphs 7–14 of this Standard relates to whether or not property is owner-occupied property or investment property and not to determining whether or not the acquisition of property is a business combination as defined in AASB 3\. Determining whether a specific transaction meets the definition of a business combination as defined in AASB 3 and includes an investment property as defined in this Standard requires the separate application of both Standards.
15 In some cases, an entity owns property that is leased to, and occupied by, its parent or another subsidiary. The property does not qualify as investment property in the consolidated financial statements, because the property is owner-occupied from the perspective of the group. However, from the perspective of the entity that owns it, the property is investment property if it meets the definition in paragraph 5. Therefore, the lessor treats the property as investment property in its individual financial statements.

Recognition

16 An owned investment property shall be recognised as an asset when, and only when:
(a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and
(b) the cost of the investment property can be measured reliably.
17 An entity evaluates under this recognition principle all its investment property costs at the time they are incurred. These costs include costs incurred initially to acquire an investment property and costs incurred subsequently to add to, replace part of, or service a property.
18 Under the recognition principle in paragraph 16, an entity does not recognise in the carrying amount of an investment property the costs of the day-to-day servicing of such a property. Rather, these costs are recognised in profit or loss as incurred. Costs of day-to-day servicing are primarily the cost of labour and consumables, and may include the cost of minor parts. The purpose of these expenditures is often described as for the ‘repairs and maintenance’ of the property.
19 Parts of investment properties may have been acquired through replacement. For example, the interior walls may be replacements of original walls. Under the recognition principle, an entity recognises in the carrying amount of an investment property the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of this Standard.
19A An investment property held by a lessee as a right-of-use asset shall be recognised in accordance with AASB 16.

Measurement at recognition

20 An owned investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement.

Aus20.1 Notwithstanding paragraph 20, not-for-profit entities shall initially measure the cost of the asset at fair value in accordance with AASB 13 Fair Value Measurement where the consideration for the asset is significantly less than fair value principally to enable the entity to further its objectives. AASB 1058 Income of Not-for-Profit Entities addresses the recognition of related amounts.

21 The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditure includes, for example, professional fees for legal services, property transfer taxes and other transaction costs.
22 \[Deleted\]
23 The cost of an investment property is not increased by:
(a) start-up costs (unless they are necessary to bring the property to the condition necessary for it to be capable of operating in the manner intended by management),
(b) operating losses incurred before the investment property achieves the planned level of occupancy, or
(c) abnormal amounts of wasted material, labour or other resources incurred in constructing or developing the property.
24 If payment for an investment property is deferred, its cost is the cash price equivalent. The difference between this amount and the total payments is recognised as interest expense over the period of credit.
25 \[Deleted\]
26 \[Deleted\]
27 One or more investment properties may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The following discussion refers to an exchange of one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence. The cost of such an investment property is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. The acquired asset is measured in this way even if an entity cannot immediately derecognise the asset given up. If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up.
28 An entity determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction. An exchange transaction has commercial substance if:
(a) the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred, or
(b) the entity-specific value of the portion of the entity’s operations affected by the transaction changes as a result of the exchange, and
(c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged.
For the purpose of determining whether an exchange transaction has commercial substance, the entity-specific value of the portion of the entity’s operations affected by the transaction shall reflect post-tax cash flows. The result of these analyses may be clear without an entity having to perform detailed calculations.
29 The fair value of an asset is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. If the entity is able to measure reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure cost unless the fair value of the asset received is more clearly evident.
29A An investment property held by a lessee as a right-of-use asset shall be measured initially at its cost in accordance with AASB 16.

Measurement after recognition

Accounting policy

30 With the exception noted in paragraph 32A, an entity shall choose as its accounting policy either the fair value model in paragraphs 33–55 or the cost model in paragraph 56 and shall apply that policy to all of its investment property.
31 AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors states that a voluntary change in accounting policy shall be made only if the change results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows. It is highly unlikely that a change from the fair value model to the cost model will result in a more relevant presentation.
32 This Standard requires all entities to measure the fair value of investment property, for the purpose of either measurement (if the entity uses the fair value model) or disclosure (if it uses the cost model). An entity is encouraged, but not required, to measure the fair value of investment property on the basis of a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued.
32A An entity may:
(a) choose either the fair value model or the cost model for all investment property backing liabilities that pay a return linked directly to the fair value of, or returns from, specified assets including that investment property; and
(b) choose either the fair value model or the cost model for all other investment property, regardless of the choice made in (a).
32B Some entities operate, either internally or externally, an investment fund that provides investors with benefits determined by units in the fund. Similarly, some entities issue insurance contracts with direct participation features, for which the underlying items include investment property. For the purposes of paragraphs 32A–32B only, insurance contracts include investment contracts with discretionary participation features. Paragraph 32A does not permit an entity to measure property held by the fund (or property that is an underlying item) partly at cost and partly at fair value. (See AASB 17 Insurance Contracts for terms used in this paragraph that are defined in that Standard.)
32C If an entity chooses different models for the two categories described in paragraph 32A, sales of investment property between pools of assets measured using different models shall be recognised at fair value and the cumulative change in fair value shall be recognised in profit or loss. Accordingly, if an investment property is sold from a pool in which the fair value model is used into a pool in which the cost model is used, the property’s fair value at the date of the sale becomes its deemed cost.

Fair value model

33 After initial recognition, an entity that chooses the fair value model shall measure all of its investment property at fair value, except in the cases described in paragraph 53.
34 \[Deleted\]
35 A gain or loss arising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which it arises.
36–
39 \[Deleted\]
40 When measuring the fair value of investment property in accordance with AASB 13, an entity shall ensure that the fair value reflects, among other things, rental income from current leases and other assumptions that market participants would use when pricing investment property under current market conditions.
40A When a lessee uses the fair value model to measure an investment property that is held as a right-of-use asset, it shall measure the right-of-use asset, and not the underlying property, at fair value.
41 AASB 16 specifies the basis for initial recognition of the cost of an investment property held by a lessee as a right-of-use asset. Paragraph 33 requires the investment property held by a lessee as a right-of-use asset to be remeasured, if necessary, to fair value if the entity chooses the fair value model. When lease payments are at market rates, the fair value of an investment property held by a lessee as a right-of-use asset at acquisition, net of all expected lease payments (including those relating to recognised lease liabilities), should be zero. Thus, remeasuring a right-of-use asset from cost in accordance with AASB 16 to fair value in accordance with paragraph 33 (taking into account the requirements in paragraph 50) should not give rise to any initial gain or loss, unless fair value is measured at different times. This could occur when an election to apply the fair value model is made after initial recognition.

42–
47 [Deleted]

48 In exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the variability in the range of reasonable fair value measurements will be so great, and the probabilities of the various outcomes so difficult to assess, that the usefulness of a single measure of fair value is negated. This may indicate that the fair value of the property will not be reliably measurable on a continuing basis (see paragraph 53).
49 \[Deleted\]
50 In determining the carrying amount of investment property under the fair value model, an entity does not double-count assets or liabilities that are recognised as separate assets or liabilities. For example:
(a) equipment such as lifts or air-conditioning is often an integral part of a building and is generally included in the fair value of the investment property, rather than recognised separately as property, plant and equipment.
(b) if an office is leased on a furnished basis, the fair value of the office generally includes the fair value of the furniture, because the rental income relates to the furnished office. When furniture is included in the fair value of investment property, an entity does not recognise that furniture as a separate asset.
(c) the fair value of investment property excludes prepaid or accrued operating lease income, because the entity recognises it as a separate liability or asset.
(d) the fair value of investment property held by a lessee as a right-of-use asset reflects expected cash flows (including variable lease payments that are expected to become payable). Accordingly, if a valuation obtained for a property is net of all payments expected to be made, it will be necessary to add back any recognised lease liability, to arrive at the carrying amount of the investment property using the fair value model.
51 \[Deleted\]
52 In some cases, an entity expects that the present value of its payments relating to an investment property (other than payments relating to recognised liabilities) will exceed the present value of the related cash receipts. An entity applies AASB 137 Provisions, Contingent Liabilities and Contingent Assets to determine whether to recognise a liability and, if so, how to measure it.

Inability to measure fair value reliably

53 There is a rebuttable presumption that an entity can reliably measure the fair value of an investment property on a continuing basis. However, in exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the fair value of the investment property is not reliably measurable on a continuing basis. This arises when, and only when, the market for comparable properties is inactive (eg there are few recent transactions, price quotations are not current or observed transaction prices indicate that the seller was forced to sell) and alternative reliable measurements of fair value (for example, based on discounted cash flow projections) are not available. If an entity determines that the fair value of an investment property under construction is not reliably measurable but expects the fair value of the property to be reliably measurable when construction is complete, it shall measure that investment property under construction at cost until either its fair value becomes reliably measurable or construction is completed (whichever is earlier). If an entity determines that the fair value of an investment property (other than an investment property under construction) is not reliably measurable on a continuing basis, the entity shall measure that investment property using the cost model in AASB 116 for owned investment property or in accordance with AASB 16 for investment property held by a lessee as a right-of-use asset. The residual value of the investment property shall be assumed to be zero. The entity shall continue to apply AASB 116 or AASB 16 until disposal of the investment property.
53A Once an entity becomes able to measure reliably the fair value of an investment property under construction that has previously been measured at cost, it shall measure that property at its fair value. Once construction of that property is complete, it is presumed that fair value can be measured reliably. If this is not the case, in accordance with paragraph 53, the property shall be accounted for using the cost model in accordance with AASB 116 for owned assets or AASB 16 for investment property held by a lessee as a right-of-use asset.
53B The presumption that the fair value of investment property under construction can be measured reliably can be rebutted only on initial recognition. An entity that has measured an item of investment property under construction at fair value may not conclude that the fair value of the completed investment property cannot be measured reliably.
54 In the exceptional cases when an entity is compelled, for the reason given in paragraph 53, to measure an investment property using the cost model in accordance with AASB 116 or AASB 16, it measures at fair value all its other investment property, including investment property under construction. In these cases, although an entity may use the cost model for one investment property, the entity shall continue to account for each of the remaining properties using the fair value model.
55 If an entity has previously measured an investment property at fair value, it shall continue to measure the property at fair value until disposal (or until the property becomes owner-occupied property or the entity begins to develop the property for subsequent sale in the ordinary course of business) even if comparable market transactions become less frequent or market prices become less readily available.

Cost model

56 After initial recognition, an entity that chooses the cost model shall measure investment property:
(a) in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations if it meets the criteria to be classified as held for sale (or is included in a disposal group that is classified as held for sale);
(b) in accordance with AASB 16 if it is held by a lessee as a right-of-use asset and is not held for sale in accordance with AASB 5; and
(c) in accordance with the requirements in AASB 116 for the cost model in all other cases.

Transfers

57 An entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. In isolation, a change in management’s intentions for the use of a property does not provide evidence of a change in use. Examples of evidence of a change in use include:
(a) commencement of owner-occupation, or of development with a view to owner-occupation, for a transfer from investment property to owner-occupied property;
(b) commencement of development with a view to sale, for a transfer from investment property to inventories;
(c) end of owner-occupation, for a transfer from owner-occupied property to investment property; and
(d) inception of an operating lease to another party, for a transfer from inventories to investment property.
(e) \[deleted\]
58 When an entity decides to dispose of an investment property without development, it continues to treat the property as an investment property until it is derecognised (eliminated from the statement of financial position) and does not reclassify it as inventory. Similarly, if an entity begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property and is not reclassified as owner-occupied property during the redevelopment.
59 Paragraphs 60–65 apply to recognition and measurement issues that arise when an entity uses the fair value model for investment property. When an entity uses the cost model, transfers between investment property, owner-occupied property and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.
60 For a transfer from investment property carried at fair value to owner-occupied property or inventories, the property’s deemed cost for subsequent accounting in accordance with AASB 116, AASB 16 or AASB 102 shall be its fair value at the date of change in use.
61 If an owner-occupied property becomes an investment property that will be carried at fair value, an entity shall apply AASB 116 for owned property and AASB 16 for property held by a lessee as a right-of-use asset up to the date of change in use. The entity shall treat any difference at that date between the carrying amount of the property in accordance with AASB 116 or AASB 16 and its fair value in the same way as a revaluation in accordance with AASB 116.
62 Up to the date when an owner-occupied property becomes an investment property carried at fair value, an entity depreciates the property (or the right-of-use asset) and recognises any impairment losses that have occurred. The entity treats any difference at that date between the carrying amount of the property in accordance with AASB 116 or AASB 16 and its fair value in the same way as a revaluation in accordance with AASB 116\. In other words:
(a) any resulting decrease in the carrying amount of the property is recognised in profit or loss. However, to the extent that an amount is included in revaluation surplus for that property, the decrease is recognised in other comprehensive income and reduces the revaluation surplus within equity.
(b) any resulting increase in the carrying amount is treated as follows:
(i) to the extent that the increase reverses a previous impairment loss for that property, the increase is recognised in profit or loss. The amount recognised in profit or loss does not exceed the amount needed to restore the carrying amount to the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised.
(ii) any remaining part of the increase is recognised in other comprehensive income and increases the revaluation surplus within equity. On subsequent disposal of the investment property, the revaluation surplus included in equity may be transferred to retained earnings. The transfer from revaluation surplus to retained earnings is not made through profit or loss.
63 For a transfer from inventories to investment property that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount shall be recognised in profit or loss.
64 The treatment of transfers from inventories to investment property that will be carried at fair value is consistent with the treatment of sales of inventories.
65 When an entity completes the construction or development of a self-constructed investment property that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount shall be recognised in profit or loss.

Disposals

66 An investment property shall be derecognised (eliminated from the statement of financial position) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal.
67 The disposal of an investment property may be achieved by sale or by entering into a finance lease. The date of disposal for investment property that is sold is the date the recipient obtains control of the investment property in accordance with the requirements for determining when a performance obligation is satisfied in AASB 15\. AASB 16 applies to a disposal effected by entering into a finance lease and to a sale and leaseback.
68 If, in accordance with the recognition principle in paragraph 16, an entity recognises in the carrying amount of an asset the cost of a replacement for part of an investment property, it derecognises the carrying amount of the replaced part. For investment property accounted for using the cost model, a replaced part may not be a part that was depreciated separately. If it is not practicable for an entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed. Under the fair value model, the fair value of the investment property may already reflect that the part to be replaced has lost its value. In other cases it may be difficult to discern how much fair value should be reduced for the part being replaced. An alternative to reducing fair value for the replaced part, when it is not practical to do so, is to include the cost of the replacement in the carrying amount of the asset and then to reassess the fair value, as would be required for additions not involving replacement.
69 Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless AASB 16 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.
70 The amount of consideration to be included in the gain or loss arising from the derecognition of an investment property is determined in accordance with the requirements for determining the transaction price in paragraphs 47–72 of AASB 15\. Subsequent changes to the estimated amount of the consideration included in the gain or loss shall be accounted for in accordance with the requirements for changes in the transaction price in AASB 15.
71 An entity applies AASB 137 or other Standards, as appropriate, to any liabilities that it retains after disposal of an investment property.
72 Compensation from third parties for investment property that was impaired, lost or given up shall be recognised in profit or loss when the compensation becomes receivable.
73 Impairments or losses of investment property, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately as follows:
(a) impairments of investment property are recognised in accordance with AASB 136;
(b) retirements or disposals of investment property are recognised in accordance with paragraphs 66–71 of this Standard;
(c) compensation from third parties for investment property that was impaired, lost or given up is recognised in profit or loss when it becomes receivable; and
(d) the cost of assets restored, purchased or constructed as replacements is determined in accordance with paragraphs 20–29 of this Standard.

Disclosure

Fair value model and cost model

74 The disclosures below apply in addition to those in AASB 16\. In accordance with AASB 16, the owner of an investment property provides lessors’ disclosures about leases into which it has entered. A lessee that holds an investment property as a right-of-use asset provides lessees’ disclosures as required by AASB 16 and lessors’ disclosures as required by AASB 16 for any operating leases into which it has entered.
75 An entity shall disclose:
(a) whether it applies the fair value model or the cost model.
(b) \[deleted\]
(c) when classification is difficult (see paragraph 14), the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business.
(d) \[deleted\]
(e) the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed.
(f) the amounts recognised in profit or loss for:
(i) rental income from investment property;
(ii) direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period;
(iii) direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period; and
(iv) the cumulative change in fair value recognised in profit or loss on a sale of investment property from a pool of assets in which the cost model is used into a pool in which the fair value model is used (see paragraph 32C).
(g) the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.
(h) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

Fair value model

76 In addition to the disclosures required by paragraph 75, an entity that applies the fair value model in paragraphs 33–55 shall disclose a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing the following:
(a) additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised in the carrying amount of an asset;
(b) additions resulting from acquisitions through business combinations;
(c) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with AASB 5 and other disposals;
(d) net gains or losses from fair value adjustments;
(e) the net exchange differences arising on the translation of the financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the reporting entity;
(f) transfers to and from inventories and owner-occupied property; and
(g) other changes.
77 When a valuation obtained for investment property is adjusted significantly for the purpose of the financial statements, for example to avoid double-counting of assets or liabilities that are recognised as separate assets and liabilities as described in paragraph 50, the entity shall disclose a reconciliation between the valuation obtained and the adjusted valuation included in the financial statements, showing separately the aggregate amount of any recognised lease liabilities that have been added back, and any other significant adjustments.
78 In the exceptional cases referred to in paragraph 53, when an entity measures investment property using the cost model in AASB 116 or in accordance with AASB 16, the reconciliation required by paragraph 76 shall disclose amounts relating to that investment property separately from amounts relating to other investment property. In addition, an entity shall disclose:
(a) a description of the investment property;
(b) an explanation of why fair value cannot be measured reliably;
(c) if possible, the range of estimates within which fair value is highly likely to lie; and
(d) on disposal of investment property not carried at fair value:
(i) the fact that the entity has disposed of investment property not carried at fair value;
(ii) the carrying amount of that investment property at the time of sale; and
(iii) the amount of gain or loss recognised.

Cost model

79 In addition to the disclosures required by paragraph 75, an entity that applies the cost model in paragraph 56 shall disclose:
(a) the depreciation methods used;
(b) the useful lives or the depreciation rates used;
(c) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period;
(d) a reconciliation of the carrying amount of investment property at the beginning and end of the period, showing the following:
(i) additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised as an asset;
(ii) additions resulting from acquisitions through business combinations;
(iii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with AASB 5 and other disposals;
(iv) depreciation;
(v) the amount of impairment losses recognised, and the amount of impairment losses reversed, during the period in accordance with AASB 136;
(vi) the net exchange differences arising on the translation of the financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the reporting entity;
(vii) transfers to and from inventories and owner-occupied property; and
(viii) other changes.
(e) the fair value of investment property. In the exceptional cases described in paragraph 53, when an entity cannot measure the fair value of the investment property reliably, it shall disclose:
(i) a description of the investment property;
(ii) an explanation of why fair value cannot be measured reliably; and
(iii) if possible, the range of estimates within which fair value is highly likely to lie.

Transitional provisions

80–
84 [Deleted by the AASB]

Business Combinations

84A AASB 2014-1 Amendments to Australian Accounting Standards, issued in June 2014, amended the previous version of this Standard as follows: added paragraph 14A and a heading before paragraph 6. An entity shall apply that amendment prospectively for acquisitions of investment property from the beginning of the first period for which it adopts that amendment. Consequently, accounting for acquisitions of investment property in prior periods shall not be adjusted. However, an entity may choose to apply the amendment to individual acquisitions of investment property that occurred prior to the beginning of the first annual period occurring on or after the effective date if, and only if, information needed to apply the amendment to those earlier transactions is available to the entity.

AASB 16

84B An entity applying AASB 16, and its related amendments to this Standard, for the first time shall apply the transition requirements in Appendix C of AASB 16 to its investment property held as a right-of-use asset.

Transfers of investment property

84C AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014–2016 Cycle and Other Amendments, issued in February 2017, amended paragraphs 57–58. An entity shall apply those amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments (the date of initial application). At the date of initial application, an entity shall reassess the classification of property held at that date and, if applicable, reclassify property applying paragraphs 7–14 to reflect the conditions that exist at that date.
84D Notwithstanding the requirements in paragraph 84C, an entity is permitted to apply the amendments to paragraphs 57–58 retrospectively in accordance with AASB 108 if, and only if, that is possible without the use of hindsight.
84E If, in accordance with paragraph 84C, an entity reclassifies property at the date of initial application, the entity shall:
(a) account for the reclassification applying the requirements in paragraphs 59–64. In applying paragraphs 59–64, an entity shall:
(i) read any reference to the date of change in use as the date of initial application; and
(ii) recognise any amount that, in accordance with paragraphs 59–64, would have been recognised in profit or loss as an adjustment to the opening balance of retained earnings at the date of initial application.
(b) disclose the amounts reclassified to, or from, investment property in accordance with paragraph 84C. The entity shall disclose those amounts reclassified as part of the reconciliation of the carrying amount of investment property at the beginning and end of the period as required by paragraphs 76 and 79.

Effective date

85 An entity shall apply this Standard for annual periods beginning on or after 1 January 2018. Earlier application is encouraged for periods beginning on or after 1 January 2014 but before 1 January 2018. If an entity applies this Standard for a period beginning before 1 January 2018, it shall disclose that fact.

85A [Deleted by the AASB]

85B In the previous version of this Standard, paragraphs 8, 9, 48, 53, 54 and 57 were amended, paragraph 22 was deleted and paragraphs 53A and 53B were added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments prospectively for annual periods beginning on or after 1 January 2009. An entity is permitted to apply the amendments to investment property under construction from any date before 1 January 2009 provided that the fair values of investment properties under construction were measured at those dates. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact and at the same time apply the amendments to paragraphs 5 and 81E of IAS 16 Property, Plant and Equipment.

85C [Deleted by the AASB]

85D AASB 2014-1 Amendments to Australian Accounting Standards, issued in June 2014, amended the previous version of this Standard as follows: added headings before paragraph 6 and after paragraph 84 and added paragraphs 14A and 84A. An entity shall apply those amendments for annual periods beginning on or after 1 July 2014. Earlier application is permitted. If an entity applies those amendments for an earlier period it shall disclose that fact.
85E AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, issued in December 2014, amended paragraphs 3(b), 9, 67 and 70 in the previous version of this Standard. An entity shall apply those amendments when it applies AASB 15.
85F AASB 16, issued in February 2016, amended the scope of AASB 140 by defining investment property to include both owned investment property and property held by a lessee as a right-of-use asset. AASB 16 amended paragraphs 5, 7, 8, 9, 16, 20, 30, 41, 50, 53, 53A, 54, 56, 60, 61, 62, 67, 69, 74, 75, 77 and 78, added paragraphs 19A, 29A, 40A and 84B and its related heading and deleted paragraphs 3, 6, 25, 26 and 34. An entity shall apply those amendments when it applies AASB 16.
85G AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014–2016 Cycle and Other Amendments, issued in February 2017, amended paragraphs 57–58 and added paragraphs 84C–84E. A for-profit entity shall apply those amendments for annual periods beginning on or after 1 January 2018. A not-for-profit entity shall apply those amendments for annual periods beginning on or after 1 January 2019. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
85H AASB 17, issued in July 2017, amended paragraph 32B. An entity shall apply that amendment when it applies AASB 17.

Withdrawal of IAS 40 (2000)

86 [Deleted by the AASB]

Commencement of the legislative instrument

Aus86.1 [Repealed]

Withdrawal of AASB pronouncements

Aus86.2 This Standard repeals AASB 140 Investment Property issued in July 2004. Despite the repeal, after the time this Standard starts to apply under section 334 of the Corporations Act (either generally or in relation to an individual entity), the repealed Standard continues to apply in relation to any period ending before that time as if the repeal had not occurred.

\[Note: When this Standard applies under section 334 of the Corporations Act (either generally or in relation to an individual entity), it supersedes the application of the repealed Standard.\]

Appendix A
Australian simplified disclosures for Tier 2 entities

Note: This appendix is an integral part of the Standard.

AusA1 Paragraphs 74–79 do not apply to entities preparing general purpose financial statements that apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

Compilation details
Accounting Standard AASB 140 Investment Property (as amended)

Note: Compilation details are not part of AASB 140.

This compiled Standard applies to annual periods beginning on or after 1 January 2023. It takes into account amendments up to and including 15 December 2022 and was prepared on 6 April 2023 by the staff of the Australian Accounting Standards Board (AASB).

This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 140 (August 2015) as amended by other Accounting Standards, which are listed in the table below.

Table of Standards

Standard	Date made	FRL identifier	Commence-ment date	Effective date(annual periods… on or after …)	Application, saving or transitional provisions
AASB 140	14 Aug 2015	F2015L01611	31 Dec 2016	(beginning) 1 Jan 2018	see (a) below
AASB 2015-8	22 Oct 2015	F2015L01840	31 Dec 2016	(beginning) 1 Jan 2017	see (b) below
AASB 16	23 Feb 2016	F2016L00233	31 Dec 2018	(beginning) 1 Jan 2019	see (c) below
AASB 1058	9 Dec 2016	F2017L00042	31 Dec 2018	(beginning) 1 Jan 2019	see (c) below
AASB 2016-7	9 Dec 2016	F2017L00043	31 Dec 2016	(beginning) 1 Jan 2017	see (d) below
AASB 2017-1	13 Feb 2017	F2017L00193	31 Dec 2017	FP (beginning) 1 Jan 2018NFP (beginning) 1 Jan 2019	see (e) below
AASB 17	19 Jul 2017	F2017L01184	31 Dec 2022	(beginning) 1 Jan 2023	see (f) below
AASB 2019-1	21 May 2019	F2019L00966	31 Dec 2019	(beginning) 1 Jan 2020	see (g) below
AASB 1060	6 Mar 2020	F2020L00288	30 Jun 2021	(beginning) 1 Jul 2021	see (h) below
AASB 2021-7	20 Dec 2021	F2021L01883	31 Dec 2021	(beginning) 1 Jan 2022	see (i) below

(a) AASB 140 applies to annual periods beginning on or after 1 January 2018 (instead of 1 January 2017) as a result of amendments made by AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15. Earlier application is permitted for periods beginning on or after 1 January 2014.
(b) Entities may elect to apply this Standard to annual periods beginning before 1 January 2017, provided that AASB 15 Revenue from Contracts with Customers is also applied.
(c) Entities may elect to apply this Standard to annual periods beginning before 1 January 2019, provided that AASB 15 is also applied to the same period.
(d) AASB 2016-7 deferred the effective date of AASB 15 (and its consequential amendments in AASB 2014-5) for not-for-profit entities to annual reporting periods beginning on or after 1 January 2019, instead of 1 January 2018. However, earlier application of AASB 140 (2015) incorporating the text that relates to AASB 15 is permitted, provided that AASB 15 is also applied.
(e) For-profit (FP) entities and not-for-profit (NFP) entities may elect to apply the amendments made to AASB 140 by this Standard early, in advance of their particular mandatory effective dates.

(f) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023, provided that AASB 9 Financial Instruments is also applied on or before the date of initial application of AASB 17. (AASB 17 was amended prior to its mandatory application by various amending Standards, including AASB 2022-8 Amendments to Australian Accounting Standards – Insurance Contracts: Consequential Amendments, made by the AASB on 15 December 2022.)

(g) Entities may elect to apply this Standard to annual periods beginning before 1 January 2020.
(h) Entities may elect to apply this Standard to annual periods beginning before 1 July 2021.
(i) Entities may elect to apply this Standard to annual periods beginning before 1 January 2022.

Table of amendments

Paragraph affected	How affected	By … [paragraph/page]
AusCF1	added	AASB 2019-1 [page 24]
3	deleted	AASB 16 [page 56]
5	amended	AASB 16 [page 56]
6	deleted	AASB 16 [page 57]
7	amendedamended	AASB 16 [page 57]AASB 2021-7 [38]
8-9	amended	AASB 16 [page 57]
16	amended	AASB 16 [page 57]
19A	added	AASB 16 [page 57]
20	amended	AASB 16 [page 57]
Aus20.1	amended	AASB 1058 [page 25]
25	deleted	AASB 16 [page 57]
26	deleted	AASB 16 [page 57]
29A	added	AASB 16 [page 58]
30	amended	AASB 16 [page 58]
32B	amended	AASB 17 [page 84]
34	deleted	AASB 16 [page 58]
40A	added	AASB 16 [page 58]
41	amended	AASB 16 [page 58]
50	amended	AASB 16 [page 58]
53	amended	AASB 16 [page 58]
53A	amended	AASB 16 [page 59]
54	amended	AASB 16 [page 59]
56	amended	AASB 16 [page 59]
57-58	amended	AASB 2017-1 [page 8]
60-62	amended	AASB 16 [page 59]
67	amended	AASB 16 [page 60]
69	amended	AASB 16 [page 60]
74	amended	AASB 16 [page 60]
75	amended	AASB 16 [page 60]
77	amended	AASB 16 [page 60]
78	amended	AASB 16 [page 60]
84B	added	AASB 16 [page 61]
84C-84E	added	AASB 2017-1 [page 9]
85	amended	AASB 2015-8 [13]
85F	added	AASB 16 [page 61]
85G	added	AASB 2017-1 [page 9]
85H	added	AASB 17 [page 84]
Aus86.1	repealed	Legislation Act 2003, s. 48D
Appendix A	replaced	AASB 1060 [page 66]

Deleted IAS 40 text

Note: Deleted IAS 40 text is not part of AASB 140.

80 An entity that has previously applied IAS 40 (2000) and elects for the first time to classify and account for some or all eligible property interests held under operating leases as investment property shall recognise the effect of that election as an adjustment to the opening balance of retained earnings for the period in which the election is first made. In addition:
(a) if the entity has previously disclosed publicly (in financial statements or otherwise) the fair value of those property interests in earlier periods (measured on a basis that satisfies the definition of fair value in IFRS 13), the entity is encouraged, but not required:
(i) to adjust the opening balance of retained earnings for the earliest period presented for which such fair value was disclosed publicly; and
(ii) to restate comparative information for those periods; and
(b) if the entity has not previously disclosed publicly the information described in (a), it shall not restate comparative information and shall disclose that fact.
81 This Standard requires a treatment different from that required by IAS 8. IAS 8 requires comparative information to be restated unless such restatement is impracticable.
82 When an entity first applies this Standard, the adjustment to the opening balance of retained earnings includes the reclassification of any amount held in revaluation surplus for investment property.
83 IAS 8 applies to any change in accounting policies that is made when an entity first applies this Standard and chooses to use the cost model. The effect of the change in accounting policies includes the reclassification of any amount held in revaluation surplus for investment property.
84 The requirements of paragraphs 27–29 regarding the initial measurement of an investment property acquired in an exchange of assets transaction shall be applied prospectively only to future transactions.
85A IAS 1 Presentation of Financial Statements (as revised in 2007) amended the terminology used throughout IFRSs. In addition it amended paragraph 62. An entity shall apply those amendments for annual periods beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period, the amendments shall be applied for that earlier period.
85C IFRS 13, issued in May 2011, amended the definition of fair value in paragraph 5, amended paragraphs 26, 29, 32, 40, 48, 53, 53B, 78–80 and 85B and deleted paragraphs 36–39, 42–47, 49, 51 and 75(d). An entity shall apply those amendments when it applies IFRS 13.
86 This Standard supersedes IAS 40 Investment Property (issued in 2000).

1 AASB 140 - Investment Property - August 2015

Compiled AASB Standard	AASB 140

Investment Property

Prepared on 6 April 2023 by the staff of the Australian Accounting Standards Board.

Compilation no. 7

Compilation date: 31 December 2022

Obtaining copies of Accounting Standards

Compiled versions of Standards, original Standards and amending Standards (see Compilation Details) are available on the AASB website: www.aasb.gov.au.

Australian Accounting Standards Board

PO Box 204

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AUSTRALIA

Phone: (03) 9617 7600

E-mail: standard@aasb.gov.au

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Other enquiries

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E-mail: standard@aasb.gov.au

Contents

COMPARISON WITH IAS 40

ACCOUNTING STANDARD

AASB 140 INVESTMENT PROPERTY

Definitions and scope

Investment property: land or building (or part) held to earn rentals or for capital appreciation, not for use in production/supply/administration or for sale in the ordinary course of business (paragraph 5; see paragraphs 7-9 for examples and non‑examples).
Owner‑occupied property: property held for use in the production or supply of goods/services or for administrative purposes (paragraph 5).
Right‑of‑use assets: the Standard includes property held by a lessee as a right‑of‑use asset as potential investment property following AASB 16 amendments (paragraphs 5, 19A, 29A, 40A).

Recognition and initial measurement

Recognition threshold: an owned investment property is recognised only when it is probable that future economic benefits will flow to the entity and cost can be measured reliably (paragraph 16). Day‑to‑day servicing costs are expensed (paragraph 18). Replacements that meet recognition criteria are capitalised and replaced parts derecognised (paragraph 19).
Initial measurement: owned investment property is initially measured at cost including transaction costs (paragraphs 20-21). For not‑for‑profit entities acquiring an asset for significantly less than fair value principally to further objectives, initial measurement may be at fair value per Aus20.1.

Policy choice: fair value model v cost model

Policy election: except for the limited exception in paragraph 32A, an entity must choose either the fair value model or the cost model and apply it to all investment property (paragraph 30).
Fair value model: after initial recognition, entities measure investment property at fair value with changes recognised in profit or loss (paragraphs 33, 35). Fair value measurement must reflect market participant assumptions including rental income from current leases (paragraph 40).
Cost model: measurement follows AASB 116 (and AASB 16 for right‑of‑use) and standard depreciation/impairment mechanics apply; however, disclosure of fair value is still required (paragraphs 56, 79(e)).

Right‑of‑use assets and funds/insurance considerations

Right‑of‑use assets: the Standard aligns with AASB 16 by treating certain lessee‑held right‑of‑use assets as investment property where applicable, and prescribes how to remeasure such assets to fair value if the fair value model is chosen (paragraphs 19A, 29A, 40A-41, 50).
Asset pools: paragraph 32A allows an entity to choose the measurement model for investment property backing liabilities that pay returns linked to the fair value of specified assets separately from other investment property, with constraints in paragraph 32B regarding funds and insurance contracts with direct participation features.

Fair value reliability and exceptions

Rebuttable presumption: there is a rebuttable presumption that fair value can be reliably measured on a continuing basis. Only in exceptional cases,where the market is inactive and alternative reliable measurements are not available,may an entity apply the cost model to that particular property (paragraphs 53-54). If an under‑construction property’s fair value is not reliably measurable, it is measured at cost until fair value becomes reliably measurable or construction completes (paragraphs 53, 53A-53B).

Transfers, disposals and derecognition

Transfers: an entity transfers property to or from investment property only when there is a change in use evidenced by observable events, not merely by management’s intention (paragraphs 57-58). For transfers under the fair value model, the deemed cost for subsequent accounting under other standards is the fair value at the date of change (paragraphs 60-65).
Disposals and derecognition: disposal occurs on sale or when permanently withdrawn from use; the date of disposal for sales is when control transfers in accordance with AASB 15 (paragraphs 66-70). Gains and losses are measured as difference between net disposal proceeds and carrying amount (paragraph 69).

Disclosures

Disclosure floor: paragraph 74 references that disclosures apply in addition to AASB 16. Paragraph 75 requires disclosure of chosen model, classification criteria used where classification is difficult, independent valuer involvement, rental income, and operating expenses. The fair value model (paragraph 76) demands a reconciliation of carrying amounts and details of fair value adjustments; the cost model (paragraph 79) requires reconciliation, depreciation methods, useful lives and disclosure of fair value.

Interplay with other Standards

The Standard is to be read with other Australian Accounting Standards and requires application of AASB 13 for fair value measurement, AASB 116 for owner‑occupied property and cost model mechanics, AASB 16 for leases and right‑of‑use assets, AASB 15 for sale timing and transaction price issues, AASB 137 for provisions, and AASB 3 for business combination considerations where relevant (see front matter, paragraphs 14A, 41, 50, 67, 70, 72, 14A).

These concepts create an accounting framework that requires significant judgement (classification, fair value reliability) and procedural choices (model selection, valuation approach), and embeds interactions with valuation markets, lease accounting mechanics and disclosure systems (paragraphs 14-14A, 30-33, 53).

AASB 140 applies to entities preparing financial statements under Australian Accounting Standards where they hold property that may meet the definition of investment property (paragraphs 1-2, 5). The principal groups affected are:

For‑profit entities preparing Tier 1 general purpose financial statements: they must comply with AASB 140 and, where they apply it, will also comply with IAS 40 because the for‑profit requirements align with IAS 40 (front matter, “Tier 1” section).
Not‑for‑profit entities: the Standard applies to not‑for‑profit entities but contains Aus paragraphs which may modify or add guidance. AusCF1 and Aus9.1 specifically address not‑for‑profit considerations, for example that property held to meet service delivery objectives does not meet the investment property definition and should instead be accounted for under AASB 116 (Aus9.1).
Lessees: entities that hold property as right‑of‑use assets under AASB 16 can have such right‑of‑use assets classified as investment property, bringing lessee accounting into the investment property framework and affecting lessees’ measurement choices and disclosures (paragraphs 19A, 29A, 40A-41).
Entities operating investment funds or issuing insurance contracts with direct participation features: paragraph 32A and 32B allow a separate measurement choice for investment property backing liabilities whose returns are directly linked to the fair value of specified assets, and paragraph 32B clarifies constraints for funds and insurance contracts, signalling that asset‑pool measurement choices affect funds and insurers differently.
Tier 2 entities using simplified disclosures: Appendix A (AusA1) exempts entities preparing general purpose financial statements under AASB 1060 from paragraphs 74-79, so Tier 2 entities have reduced disclosure obligations (AusA1).

Other stakeholders affected indirectly:

Valuers and valuation firms: the Standard encourages independent valuation involvement (paragraph 32) and requires disclosure of whether fair value is based on an independent valuer’s valuation (paragraph 75(e)), creating demand for valuation services.
Auditors and audit committees: the Standard’s judgement‑intensive areas (classification, fair value reliability, transfers, choice of model and disclosure) increase the audit focus on valuation policies, independence of valuers, and consistency (paragraphs 14, 30-31, 53, 75-79).
Users of financial statements: investors and creditors will see either increased volatility in profit or loss (fair value model, paragraph 35) or different disclosure patterns (cost model) which affects assessment of performance and risk.

Who pays

The primary economic cost falls on reporting entities who must incur valuation costs, strengthen internal controls, document classification criteria (paragraph 14 requires development of criteria), and prepare model‑dependent disclosures (paragraphs 74-79). Where the fair value model is selected, entities will also remit additional effort to remeasure at fair value and recognise valuation changes in profit or loss (paragraphs 33, 35, 40).

Who decides

The entity’s management and those charged with governance decide classification (paragraph 14), accounting policy choice between fair value and cost (paragraphs 30-31), whether the fair value of a given property is reliably measurable on a continuing basis (paragraph 53), and whether to apply the special pool choice in paragraph 32A for liabilities‑backing assets (paragraphs 32A-32B). Disclosures must reflect those choices (paragraphs 75-79).

Consequences for contract counterparties and markets

Lessees/lessors may find negotiation and reporting affected by the reclassification of right‑of‑use assets (paragraphs 19A, 40A-41, 50). Entities that change the use of property must produce objective evidence to support transfers (paragraphs 57-58). The requirement to measure fair value even when the cost model is used for disclosure purposes (paragraphs 32, 79(e)) increases transparency and may affect market expectations.

In short, the Standard affects a wide set of reporting entities, particularly those with investment property or lease arrangements that create right‑of‑use assets, and imposes valuation, disclosure and judgement‑intensive processes that reporting entities must resource and document.

Primary duties imposed on the reporting entity (management and those charged with governance):

Classification duty: develop and apply criteria to distinguish investment property from owner‑occupied property and inventory, particularly where classification is difficult, and disclose those criteria (paragraphs 14, 75(c)).
Recognition duty: recognise owned investment property only when future economic benefits are probable and cost is reliably measurable (paragraph 16). For lessee right‑of‑use assets, recognition follows AASB 16 (paragraph 19A).
Measurement choice duty: adopt and consistently apply an accounting policy, being either the fair value model or the cost model, for all investment property except where paragraph 32A applies, and document the policy and any rationale for change in accordance with AASB 108 (paragraphs 30-31, 32A).
Fair value measurement duty: where the fair value model is chosen, measure all investment property at fair value after initial recognition and recognise changes in profit or loss (paragraphs 33-35); ensure fair value reflects market participant assumptions, including rental income under current market conditions (paragraph 40).
Disclosure duty: furnish the specific disclosures listed in paragraphs 74-79, including the reconciliation of carrying amounts (paragraph 76) under the fair value model, and details on rental income and direct operating expenses (paragraph 75(f)). If the fair value model is not applied to a particular property due to lack of reliable fair value measurement, disclose the explanation and range of estimates if possible (paragraph 78).
Transfer and derecognition duty: reclassify property only on an evidenced change in use (paragraphs 57-58), apply the fair value as deemed cost for transfers to owner‑occupied property or inventories when the fair value model is used (paragraph 60), and derecognise property on disposal or when permanently withdrawn from use (paragraphs 66-69).
Special measurement duty for under‑construction properties: measure at cost if fair value cannot be reliably measured until fair value is reliably measurable or construction completes (paragraphs 53, 53A-53B).

Rights and choices

Policy election right: the entity has the right to choose between the fair value and cost models and, in specified circumstances, to choose different models for investment property backing certain liabilities (paragraphs 30, 32A).
Valuation practice: entities are encouraged, but not required, to obtain valuations from independent valuers with recognised qualifications and recent experience (paragraph 32). Entities must disclose whether such valuations were used (paragraph 75(e)).
Exception to uniformity: paragraph 32A grants the right to choose a different model for investment property backing liabilities that pay returns linked to specific assets, subject to paragraph 32B constraints (notably for funds and insurance contracts).

Constraints on rights

Policy changes are constrained by AASB 108 which requires voluntary changes only if they produce reliable and more relevant information (paragraph 31).
Rebuttable presumption on fair value reliability restricts the right to revert to cost model except in exceptional market circumstances (paragraphs 53-54).

Operational duties linked to other Standards

Lessee accounting duties under AASB 16 apply where right‑of‑use assets are involved; when applying the fair value model to right‑of‑use assets, valuation must reflect lease liabilities in the carrying amount (paragraphs 40A-41, 50).
For acquisitions, the entity must assess whether the acquisition is an asset or a business combination under AASB 3 (paragraph 14A).

In sum, AASB 140 imposes duties of classification, measurement, disclosure and documentation on reporting entities, while allowing management considered choice of measurement model subject to disclosure, AASB 108 constraints and limited exceptions where fair value measurement is unreliable.

AASB 140 itself is an Accounting Standard made by the Australian Accounting Standards Board under section 334 of the Corporations Act 2001 (front matter: “The Australian Accounting Standards Board made Accounting Standard AASB 140… under section 334 of the Corporations Act 2001 on 14 August 2015”). The Standard sets recognition, measurement and disclosure requirements but does not itself specify civil or criminal penalties within its text for non‑compliance. Enforcement and consequences for failure to comply with accounting standards in Australia arise from the broader regulatory and corporate governance framework rather than from this Standard’s text.

Practical enforcement pathways and consequences that follow from the legal embedding of Australian Accounting Standards (as articulated in the front matter) include the following mechanisms (these mechanisms are not invented in AASB 140 but flow from how accounting standards operate in the Australian regulatory architecture):

Applicability under the Corporations Act: because the AASB made this Standard under section 334 of the Corporations Act, entities required by the Corporations Act to prepare financial reports must apply applicable Australian Accounting Standards. Non‑compliance with applicable Accounting Standards can be an audit qualification, a process trigger for regulator scrutiny or may give rise to enforcement actions under the Corporations Act obligations to prepare true and fair financial statements. AASB 140’s compilation details state the AASB made the Standard under section 334 (front matter).
Audit and assurance consequences: external auditors are required to evaluate whether financial statements comply with Australian Accounting Standards. If an auditor concludes that a financial report is materially misstated because of non‑application of AASB 140 or incorrect measurements/disclosures, the auditor will qualify the audit opinion, which has commercial and regulatory consequences. The Standard’s emphasis on judgement (classification, fair value reliability, transfers) focuses audit attention (paragraphs 14, 53, 57).
Market and contractual consequences: while not contained in the Standard, entities that misapply the Standard may face contractual breaches (eg covenant calculations relying on reported balances), investor remediation, or reputational consequences. The Standard itself obliges disclosure (paragraphs 74-79) which supports users in enforcing market discipline.

The Standard does include specific transitional and application timing rules (paragraphs 85-85H and Compilation details) and requires entities to disclose early application (paragraph 85). The Standard contains no internal provisions that impose fines or criminal sanctions. Any civil or regulatory enforcement follows from obligations to comply with Australian Accounting Standards as embedded in the Corporations Act and enforced by regulators (the Standard’s front matter references section 334 as the enabling Act).

Key compliance risks that can give rise to enforcement action via audit/regulatory channels, based on the Standard’s requirements, include:

Failure to disclose accounting policy choices, classification criteria and valuation basis as required (paragraphs 75-79);
Misclassification of property (failure to apply paragraphs 7-15 and disclose criteria per paragraph 75(c));
Misapplication of the rebuttable presumption regarding reliable fair value measurement (paragraph 53) by inappropriately switching to the cost model without objective evidence; and
Incorrect treatment of right‑of‑use assets held as investment property in contravention of AASB 16 and this Standard (paragraphs 19A, 40A-41).

Because the Standard does not define civil penalties, those seeking remedies or penalties must look to the Corporations Act, professional standards, and regulatory enforcement processes where applicable.

AASB 140 is designed to be read in the context of other Australian Accounting Standards and interacts directly with several specific standards and legal instruments. The Standard itself references and incorporates interactions; the following summarises those cross‑references and practical interaction points as set out in the text.

Interaction with Corporations Act 2001

The AASB made the Standard under section 334 of the Corporations Act 2001 (front matter). This embedding means that entities required to prepare financial reports under the Corporations Act must apply AASB 140 where relevant. The Standard’s compilation and commencement details note application timing and transitional arrangements that align with Corporations Act application processes (Compilation details).

Interaction with AASB 13 Fair Value Measurement

Fair value measurement under AASB 140 must be performed in accordance with AASB 13. Paragraph 5 defines fair value referencing AASB 13, and paragraph 40 instructs entities to ensure fair value reflects market participant assumptions. Paragraph 32 encourages independent valuations and paragraph 77 requires reconciliations when valuations are adjusted for double counting.

Interaction with AASB 16 Leases

AASB 16 amended the scope of AASB 140 to include right‑of‑use assets that meet the investment property definition. The Standard includes specific requirements for right‑of‑use assets: initial measurement per AASB 16 and subsequent remeasurement to fair value if the fair value model is chosen (paragraphs 19A, 29A, 40A-41, 50). Paragraph 41 explains that when lease payments are at market rates the fair value of a lessee‑held right‑of‑use asset at acquisition net of expected lease payments should be zero, and paragraph 50 discusses double‑counting adjustments where valuations are net of recognised lease liabilities.

Interaction with AASB 116 Property, Plant and Equipment

Owner‑occupied property falls under AASB 116; transfers to owner‑occupied status require application of AASB 116 up to the date of change and the treatment of revaluation changes as specified in paragraph 61-62. The cost model for investment property after initial recognition follows the mechanics in AASB 116 (paragraph 56).

Interaction with AASB 15 Revenue from Contracts with Customers

The date of disposal for investment property sold is the date control transfers in accordance with AASB 15 (paragraph 67). Paragraphs 70 and 69 require measurement of consideration and subsequent adjustments in line with AASB 15 transaction price and change‑in‑transaction‑price mechanics.

Interaction with AASB 3 Business Combinations

Paragraph 14A requires entities to apply AASB 3 to determine whether the acquisition of investment property is an asset acquisition or a business combination. This interaction affects initial recognition, measurement and disclosure when investment property is acquired as part of a business combination.

Interaction with AASB 137 Provisions, Contingent Liabilities and Contingent Assets

If an entity expects the present value of payments relating to an investment property to exceed the present value of related receipts, AASB 137 is applied to determine whether to recognise a liability and how to measure it (paragraph 52). Additionally, liabilities retained after disposal are addressed under AASB 137 (paragraph 71).

Interaction with AASB 17 Insurance Contracts and AASB 1058

Paragraphs 32B and 85H reference AASB 17 for the definition of insurance contract terms used in paragraph 32B. Aus20.1 cross‑references AASB 1058 for not‑for‑profit initial measurement where consideration is significantly less than fair value.

Interaction with AASB 1060 (Tier 2 simplified disclosures)

Appendix A (AusA1) states that paragraphs 74-79 do not apply to entities preparing general purpose financial statements under AASB 1060 - Simplified Disclosures for Tier 2 entities, modifying disclosure obligations and interaction between AASB 140 and the Tier structure.

Other consequential interactions and effective date dependencies

The Compilation details and Table of Standards set out consequential amendments and effective date interdependencies with AASB 15, AASB 16, AASB 17 and AASB 9. The effective application of AASB 140 may be contingent on or aligned with the application of those other standards in some circumstances (see Compilation table and notes a-i).

Practical implications of these interactions

Because AASB 140 delegates fair value measurement to AASB 13 and lease mechanics to AASB 16, entities must ensure valuation teams and lease accounting teams coordinate. For example, the treatment of right‑of‑use assets requires adding back recognised lease liabilities when arriving at fair value carrying amounts to avoid double counting (paragraph 50). Transfers between owner‑occupied and investment property require coordinated application of AASB 116/AASB 16 and AASB 140 (paragraphs 60-62). Where multiple standards intersect (eg a sale and leaseback involving investment property), entities must reconcile the treatment under each standard (paragraphs 67, 69, 70).

In short, AASB 140 is tightly integrated with AASB 13, AASB 16, AASB 116, AASB 15, AASB 3, AASB 137 and other Standards, and the Compilation details make clear that application timelines and transitional provisions depend on those other standards’ effective dates and amendments.

The compiled AASB 140 incorporates amendments up to and including 15 December 2022. The Standard’s text and compilation details set out an explicit amendment timeline and identify material amendments and their impacts. The following sets out the amendment history as presented in the compilation.

Key amendments and the instruments that made them (as listed in the Compilation table and Table of amendments):

AASB 140 (original 14 August 2015): This Accounting Standard (F2015L01611) commenced compilation on 31 December 2016 and had an effective date for annual periods beginning on or after 1 January 2018 (see Compilation table row for AASB 140 and note (a)).
AASB 2015‑8 (22 Oct 2015): Adjusted effective date consequential to AASB 15 adoption (Compilation table row AASB 2015‑8; note (a) explains effective date changes).
AASB 16 Leases (23 Feb 2016): AASB 16 amended the scope of AASB 140 by defining investment property to include property held by a lessee as a right‑of‑use asset, and amended numerous paragraphs (paragraph 85F lists the affected paragraphs: 5, 7, 8, 9, 16, 20, 30, 41, 50, 53, 53A, 54, 56, 60-62, 67, 69, 74-78, and added 19A, 29A, 40A, 84B and deleted paragraphs 3, 6, 25, 26 and 34). The amendment required entities to apply those changes when they applied AASB 16 (paragraph 85F).
AASB 2014‑1 (June 2014): Added paragraph 14A and transitional paragraph 84A; entities apply this amendment prospectively for acquisitions of investment property from the beginning of the first period that adopts the amendment (paragraph 84A).
AASB 2017‑1 (Feb 2017): Amended paragraphs 57-58 concerning transfers of investment property and added transitional paragraphs 84C-84E. For‑profit entities were required to apply these amendments for periods beginning on or after 1 January 2018; not‑for‑profit entities had a later mandatory date (paragraph 85G).
AASB 17 (19 July 2017): Amended paragraph 32B to clarify interactions with insurance contracts; effective date alignment and application timing are referenced in paragraph 85H.
AASB 2019‑1, AASB 1060 and other consequential amendments: The Compilation table lists later standards (AASB 2019‑1, AASB 1060, AASB 2021‑7 and others) with their dates and effective dates (Compilation table). Appendix A reflects replacement of its disclosure requirements by AASB 1060 for Tier 2 entities (Table of amendments: “Appendix A replaced by AASB 1060 [page 66]”).

Table of amendments (paragraph references)

The Table of amendments at the end of the compiled Standard lists each affected paragraph, the nature of the change and the amending standard (for example, paragraph 19A added by AASB 16; paragraph Aus20.1 amended by AASB 1058; paragraph 32B amended by AASB 17; paragraphs 57-58 amended by AASB 2017‑1). The table is a point reference for every change incorporated in this compilation.

Transitional provisions

The Standard includes a number of transitional provisions explaining prospective application for certain amendments (paragraphs 84A, 84B, 84C-84E, and notes in Compilation table). For example, AASB 2014‑1’s addition of paragraph 14A applies prospectively to acquisitions from the beginning of the first period adopting the amendment (paragraph 84A). AASB 16’s changes are applied when the entity applies AASB 16 (paragraph 85F). The Compilation notes contain detailed effective dates and application notes (Compilation table and footnotes a-i).

Effective dates and application sequencing

The compilation sets out a sequence of effective dates that reflect dependencies on other Standards. Paragraph 85 and Compilation table set out effective dates and permitted earlier application in some cases, including special provisions for for‑profit and not‑for‑profit entities (paragraphs 85, 85D-85G and Compilation notes).

Replacement and withdrawal

Aus86.2 records that this Standard repeals the AASB 140 issued in July 2004, and provides that the repealed Standard continues to apply to prior periods ending before commencement as if repeal had not occurred (Aus86.2). Deleted IAS 40 text is retained for reference in the compilation document but is not part of the current Standard.

In sum, since its AASB 140 (2015) issuance, the Standard has been amended principally to incorporate lease accounting changes (AASB 16), to refine transfer rules (AASB 2017‑1), to accommodate insurance/funds interactions (AASB 17), and to align effective dates with other Standards (AASB 15, AASB 9, AASB 17), with Appendix A replaced by AASB 1060 for Tier 2 simplified disclosures. The Table of amendments and Compilation details are the authoritative record of those changes in this compiled version.

The AASB 140 compiled Standard itself contains no case law or judicial decisions and does not list any litigation history. The text includes no citations to court decisions or administrative rulings. The only legal references are to other Accounting Standards and to the enabling statutory power under section 334 of the Corporations Act 2001 (front matter).

What the Standard documents regarding prior standards and transitional judicial or precedent issues

The Standard contains a “Deleted IAS 40 text” section which summarises prior IAS 40 transitional guidance and application issues (the deleted IAS 40 text at the end of the compilation), such as restatement and retained revaluation surplus treatment when entities first apply the Standard (deleted paragraphs 80-86). Those deleted IAS 40 paragraphs are included for information and are not part of AASB 140. They are not judicial decisions.

Practical implication for litigation risk

Because AASB 140 requires significant judgement (classification, determination of fair value reliability), those judgements can become points of dispute between preparers, auditors and users (eg shareholders, creditors). The Standard itself does not catalogue litigation outcomes, but the areas of highest potential dispute identifiable from the text are:
- Classification disputes (investment property v owner‑occupied) where management’s criteria and subsequent reclassification may be challenged (paragraphs 7-15, 57-58, 75(c));
- Fair value measurement disputes where market activity is limited and alternative valuation techniques are applied (paragraphs 32, 53-54, 76-78);
- Treatment of right‑of‑use assets and the interaction with AASB 16, particularly at acquisition and when lease payments are at market rates (paragraphs 40A-41, 50); and
- Transfer and disposal timing disputes where AASB 15 timing rules and AASB 140 derecognition rules intersect (paragraphs 66-70).

Absence of named cases

The Standard does not name any judicial decisions or administrative rulings, and the “Litigation history” section thus contains no entries.

For practitioners seeking precedential context, the Standard itself directs attention to the relevant paragraphs and to interacting Accounting Standards; any litigation risk analysis must therefore draw on audit outcomes, regulator enforcement actions and case law that lie outside the text of this Standard. The Standard supplies the authoritative accounting framework; litigation events would turn on how that framework was applied in particular factual contexts.

The Standard contains several areas where misapplication, misunderstanding or failure to document can create material misstatement risks, disclosure failures or operational burdens. These are the principal “gotchas” drawn from the text.

Classification is judgement‑intensive; intention is insufficient

A change in classification to or from investment property requires evidence of a change in use, not merely a change in management’s intentions (paragraphs 57-58). Entities must develop criteria and apply them consistently (paragraph 14). Failure to document the objective evidence for transfers (eg commencement of owner‑occupation, inception of an operating lease to another party) can lead to challenge (paragraphs 57(a)-(d), 75(c)).

Right‑of‑use assets complicate valuation and double‑counting

A lessee that holds investment property as a right‑of‑use asset must observe AASB 16 initial recognition rules and may need to remeasure to fair value under the fair value model. Paragraph 41 notes that when lease payments are at market rates, the fair value of such a right‑of‑use asset at acquisition net of expected lease payments should be zero. Valuations that are net of lease payments may require adding back recognised lease liabilities to avoid double counting (paragraph 50). Misapplying this can overstate or understate carrying amounts.

The fair value model puts volatility straight through profit or loss

Fair value gains and losses are recognised in profit or loss (paragraph 35). Entities selecting the fair value model must be prepared for earnings volatility and explain this to stakeholders. The Standard does not moderate this requirement; it is mechanical.

The rebuttable presumption on fair value reliability is narrow

There is a rebuttable presumption that fair value can be reliably measured on a continuing basis (paragraph 53). Only in exceptional cases (inactive markets and lack of alternative reliable measures) may an entity revert to the cost model for that particular property. Improperly asserting unreliability of fair value can be a point of contention with auditors/regulators.

Fair value measurement and disclosure obligations persist even if cost model used

Paragraph 32 requires all entities to measure fair value for either measurement or disclosure; paragraph 79(e) requires disclosure of fair value when the cost model is used. Entities cannot avoid fair value assessment simply by electing the cost model for measurement; disclosure obligations still demand fair value information.

Transfers between pools measured under different models cause immediate profit or loss

Paragraph 32C requires sales of investment property between asset pools measured using different models to be recognised at fair value with the cumulative change recognised in profit or loss. Transferring properties between pools without careful planning or documentation may create unexpected P&L impacts.

Valuation adjustments for double counting

When a valuation is adjusted (for example to add back a recognised lease liability or to avoid counting furniture separately) paragraph 77 requires disclosure of reconciliation between the valuation obtained and the adjusted valuation. Failure to provide this reconciliation and narrative can be a disclosure breach (paragraphs 50, 77).

Under‑construction properties: special rules and presumption limitations

If fair value for an under‑construction property is not reliably measurable, the property is measured at cost until fair value becomes reliably measurable or construction is completed (paragraph 53, 53A). Paragraph 53B prevents rebutting the presumption for under‑construction properties after initial recognition. Misunderstanding these timing constraints can cause incorrect measurement.

Interaction with AASB 15 on disposal timing and transaction price

The date of disposal is determined under AASB 15 (paragraph 67), and paragraph 70 requires gains/losses to use AASB 15 transaction price rules. Failure to apply AASB 15 mechanics to investment property sales can misstate gain/loss and recognition timing.

Not‑for‑profit and Tier 2 subtleties

Aus9.1 clarifies that property held to meet service delivery objectives is not investment property even if it generates incidental rental income. Practitioners may misclassify such assets. Appendix A (AusA1) exempts Tier 2 entities from paragraphs 74-79; failing to apply Appendix A correctly may lead to over or under‑disclosure.

Accounting policy change constraints

A voluntary change in accounting policy is permitted only if it results in financial statements that provide reliable and more relevant information (AASB 108 per paragraph 31). The Standard notes it is highly unlikely that changing from fair value to cost will be more relevant. Entities wanting to change policies must demonstrate compliance with AASB 108; otherwise the change will be disallowed by auditors.

Requirement to disclose independent valuer involvement

Paragraph 75(e) requires disclosure of whether fair value is based on a valuation by an independent valuer with recognised qualification and recent experience. Omitting this disclosure, or using valuers who do not meet the Standard’s criteria without disclosing that fact, will be non‑compliant.

Hidden residual value assumption under cost fallback

When fair value cannot be reliably measured and an entity applies the cost model, paragraph 53 requires the residual value of the investment property to be assumed zero. This affects depreciation and impairment calculations and can materially affect carrying amounts.

Business combination considerations

Paragraph 14A requires separate application of AASB 3 when acquisition may amount to a business combination. Failure to assess whether a property acquisition is a business combination will lead to incorrect initial measurement treatment.

Each of these “gotchas” flows directly from specific paragraphs of the Standard. They create compliance, audit, valuation and disclosure workstreams that entities must plan for and document.

Compliance with AASB 140 requires a combination of governance decisions, written policies, valuation processes, documentation and disclosure systems. The following is a practical, source‑grounded checklist mapped to the relevant paragraphs.

Determine scope and classification

Review all property holdings against the definitions in paragraph 5 and guidance in paragraphs 7-15. Distinguish investment property from owner‑occupied property and inventory, and document decisions. Where classification is difficult, develop explicit criteria and ensure they are disclosed (paragraphs 14, 75(c)). For not‑for‑profit entities, apply Aus9.1 concerning service delivery objectives.

Recognition and initial measurement

Apply recognition criteria (probable future economic benefits and reliable measurement) before capitalising any property (paragraph 16). Capitalise directly attributable costs per paragraph 21; exclude day‑to‑day servicing (paragraph 18). For deferred payment arrangements, measure at cash price equivalent and treat the difference as interest (paragraph 24). For property acquired in exchange, evaluate commercial substance per paragraphs 27-29.

Choose an accounting policy and governance approval

Decide between the fair value model and the cost model and apply it to all investment property, except consider paragraph 32A if investment property backs specified liabilities. Document the policy decision, the board’s approval, and the rationale addressing AASB 108’s guidance on policy changes (paragraphs 30-31, 32A-32B). If the cost model is chosen, remember fair value disclosures are still required (paragraphs 32, 79(e)).

Establish valuation processes

If the fair value model is chosen, set up regular fair value measurement processes in line with AASB 13 and paragraph 40 (ensure assumptions reflect market participants). Encourage or engage independent valuers with recognised qualifications and recent experience; paragraph 32 encourages this and paragraph 75(e) requires disclosure of such involvement. Document valuation methodologies, inputs, and sensitivity ranges.

Address right‑of‑use assets under AASB 16

For lessee‑held properties, determine whether right‑of‑use assets meet the investment property definition (paragraphs 19A, 29A). Apply AASB 16 for initial recognition (paragraph 19A) and if the fair value model is used, remeasure to fair value while avoiding double counting by adding back recognised lease liabilities if valuations are net of payments, per paragraph 50. Document the approach and reconciliations required by paragraph 77 where adjustments are significant.

Implement controls for rebuttable presumption and under‑construction property

Define objective criteria and evidence for when fair value is not reliably measurable (paragraph 53). Maintain market activity indicators and alternative valuation technique availability logs. For under‑construction properties where fair value is not reliably measurable, measure at cost until fair value becomes reliably measurable or construction completes (paragraphs 53, 53A, 53B). Keep contemporaneous documentation to defend the presumption decision.

Transfers and derecognition procedures

Create procedures to identify events that constitute a change in use and apply transfer rules (paragraphs 57-58). For transfers under the fair value model, use fair value at the date of change as deemed cost per paragraph 60. For disposals, apply AASB 15 to determine the date of disposal and measure consideration using its transaction price rules (paragraphs 66-70). Maintain checklists to ensure compliance.

Disclosure systems

Implement reporting templates that capture all disclosure items in paragraphs 74-79. For fair value model users, ensure reconciliations of carrying amounts (paragraph 76), net gains/losses from fair value adjustments, and explanation where valuations were materially adjusted (paragraph 77). For cost model users, ensure disclosure of depreciation methods, useful lives, gross carrying amount and accumulated depreciation, reconciliation items and fair value (paragraph 79). For Tier 2 entities under AASB 1060, apply Appendix A (AusA1) exemption where relevant.

Coordination with other standards

Coordinate with teams responsible for AASB 13, AASB 16, AASB 116, AASB 15, AASB 137 and AASB 3 where interactions occur. For acquisitions, perform AASB 3 assessment to determine whether the transaction is a business combination (paragraph 14A). For liabilities or insurance/fund contexts, consider paragraph 32A and 32B requirements.

Audit readiness and documentation

Keep a clear audit trail for all material judgements: classification criteria (paragraph 14), fair value measurement inputs, independent valuer engagement (paragraph 32 and 75(e)), rationale for any assertion that fair value is not reliably measurable (paragraph 53), and accounting policy choices under AASB 108 (paragraph 31). Prepare reconciliations required by paragraphs 76 and 79 and ensure narrative disclosures explain major movements.

Transitional and effective date handling

Review the Compilation table and the relevant transitional paragraphs (84A-84E, 85-85H) to ensure treatment of prior periods and effective date obligations are managed appropriately. Disclose any earlier application as required by paragraph 85.

Practical frequency and triggers

The Standard does not prescribe a strict valuation frequency but the fair value model implies regular remeasurement; align valuation frequency with reporting periods, materiality and market activity indicators in AASB 13. Establish triggers for remeasurement or impairment reviews, such as changes in market conditions or plans to redevelop or sell (paragraphs 33, 53, 57-58).

Special considerations for not‑for‑profit entities

Apply Aus20.1 for initial measurement where consideration is significantly less than fair value principally to enable the entity to further its objectives, and consult AASB 1058 for recognition of related amounts. For transfers and effective dates, note the later mandatory dates referenced in paragraph 85G for not‑for‑profit entities.

Summary action list

Prepare written accounting policy and board approval for model choice (paragraphs 30-31).
Develop and document classification criteria and apply consistently, disclosing them when classification is difficult (paragraphs 14, 75(c)).
Engage qualified independent valuers where prudent and document valuation methods and inputs (paragraphs 32, 75(e), 77).
Ensure reconciliation templates and disclosure checklists capture paragraph 74-79 items.
Coordinate with lease, revenue, business combination and impairment accounting teams to handle cross‑standard interactions (paragraphs 14A, 41, 67, 70, 72).

By following the Standard’s paragraph references and establishing robust governance, valuation and disclosure practices, entities can meet the measurement, recognition and disclosure obligations of AASB 140 and create an audit‑ready documentation package.

AASB 140 - Investment Property - August 2015

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AASB 140 - Investment Property - August 2015

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1 AASB 140 - Investment Property - August 2015

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Who it affects

Key duties and rights

Penalties and enforcement

How it interacts with other laws

Amendment history

Litigation history

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How to comply