The fair value of investment property

Learning objectives

• Explain that fair value reflects market conditions at the reporting date and not the entity's intentions.L2, L3

Normative references

• IAS 40 §5Definitions: carrying amount, cost, fair value, investment property (land or a building held to earn rentals or for capital appreciation, including through a right-of-use asset) and owner-occupied property (held for use in the production or supply of goods or services or for administrative purposes).
• IAS 40 §33Fair value model: after initial recognition, all investment property is measured at fair value, except in the cases described in para. 53.

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

2 questions

• Under IAS 40, what does the fair value of an investment property reflect at the reporting date?L2
• An appraiser proposes for an investment property a value of 9,800,000 that includes synergies only Wexan could obtain by combining the property with its own sites; market conditions at the reporting date would lead to 9,200,000 (case data). In three to five sentences, justify the value to use under the fair value model.L3