Ancillary services provided to occupants

Learning objectives

• Assess whether the services provided to occupants are ancillary or significant to the arrangement as a whole (office building compared with a hotel).L3, L4

Normative references

• IAS 40 §11Ancillary services provided to occupants: if these services are a relatively insignificant component of the arrangement as a whole, the property remains investment property.
• IAS 40 §12Where the services provided to occupants are significant, the property is not investment property: a hotel owned and managed by the entity, whose services to guests are significant to the arrangement as a whole, is owner-occupied property.
• IAS 40 §13Difficulty in assessing whether services are significant (hotel management contracts, owner as passive investor or as operator): a judgement based on the facts.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• An owner leases a building and provides some services to the occupants. Which of these statements are correct? (More than one answer possible.)L3
• Calvera leases an office tower to third parties. It provides security and cleaning of the common areas, services that represent about 3% of the value of the lease arrangement (case assumption). Which classification is consistent with the rule?L3
• Dorane owns a hotel. It has entrusted its management to an operator by contract, but it bears the results of operations and the services to guests (catering, housekeeping, reception) are significant within the arrangement as a whole (case data). In three to five sentences, justify the classification of the hotel.L4