Transfers under the cost model

Learning objectives

• Explain that transfers under the cost model do not change the carrying amount.L3, L4
• Record the entry relating to transfers under the cost model and state its effect on the financial statements.L3, L4

Normative references

• IAS 40 §59Paras. 60 to 65 apply to the fair value model; under the cost model, a transfer between investment property, owner-occupied property and inventories does not change the carrying amount or the cost of the property, for measurement or disclosure purposes.

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

3 questions

• Under the cost model, the transfer of an investment property to owner-occupied property leads to remeasuring it at fair value at the date of the change in use.L3
• Ivarne applies the cost model. On 30 September, it starts occupying a property previously leased, which evidences a change in use (case data). Cost of the property: {cost}; accumulated depreciation: {accumulated_depreciation}; carrying amount: {carrying_amount}. Record the transfer entry to owner-occupied property.L4
• Jolvane, which applies the cost model, transfers an investment property to owner-occupied property after an evidenced change in use. Cost: 6,000,000; accumulated depreciation: 1,500,000; fair value at the date of transfer: 7,200,000 (case data). At what carrying amount is the owner-occupied property recorded after the transfer?L4