Subsequent costs

Learning objectives

• Distinguish day-to-day servicing (expense) from the replacement of parts (asset) for investment property.L1, L2

Normative references

• IAS 40The recognition criteria are applied to all investment property costs at the time they are incurred (initial costs and subsequent costs).
• IAS 40 §18The costs of day-to-day servicing are not recognised in the carrying amount of the asset but in profit or loss.
• IAS 40 §19Replacement of parts: the cost of the new part is recognised in the carrying amount if the recognition criteria are met, and the carrying amount of the replaced part is derecognised.

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

2 questions

• The owner of an investment property spends 8,000 on day-to-day servicing (painting, minor repairs). How is this expenditure accounted for?L1
• Which of the following expenditures on an investment property are recognised as an asset, the recognition criteria being met? (More than one answer possible.)L2