From investment property to owner-occupied

Learning objectives

• Determine the deemed cost of a property transferred to owner-occupied property (fair value at the date of change in use).L3, L4
• Calculate, from the case data, the amount relating to a transfer from investment property to owner-occupied property and justify the basis of calculation.L3, L4
• Record the entry relating to a transfer from investment property to owner-occupied property and state its effect on the financial statements.L3, L4

Normative references

• IAS 40 §60Transfer from investment property carried at fair value to owner-occupied property or inventories: the deemed cost is the fair value at the date of change in use.
• IAS 40 §61Transfers to investment property carried at fair value: IAS 16 (IFRS 16 for a right-of-use asset) applies up to the date of change in use; any difference at that date between the carrying amount and the fair value is treated as a revaluation under IAS 16 (see also para. 62).
• IAS 40 §62Transfer from owner-occupied property to investment property carried at fair value: depreciation and impairment up to that date, then the difference is treated as a revaluation under IAS 16 (a decrease in profit or loss unless there is an existing revaluation surplus; an increase in profit or loss to the extent it reverses a previous impairment loss, then in other comprehensive income); the surplus may be transferred to retained earnings without passing through profit or loss.

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

4 questions

• An investment property measured at fair value becomes owner-occupied property after an evidenced change in use. What is its deemed cost for subsequent accounting?L3
• Oravane measures its investment property at fair value. On 1 October, it moves its head office into one of them (change in use evidenced, case data). Its carrying amount at the last reporting date was {previous_carrying_amount}; its fair value on 1 October is {fair_value_at_change}. At what amount is the owner-occupied property recognised, as deemed cost, in its subsequent accounting?L3
• Pavane applies the fair value model. It begins to occupy an investment property (change in use evidenced, case data). The latest change in fair value is already recognised: its fair value at the date of the change is {fair_value_at_change}. Record the transfer entry to owner-occupied property.L3
• Quivane measures its investment property at fair value: 8,000,000 at the last reporting date for a property it begins to occupy entirely as offices on 1 September, which evidences a change in use (case data). Its fair value on 1 September is 8,300,000. What amount should be used as the deemed cost of the owner-occupied property?L4