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Accounting for Investment Properties

Investment properties are real estate assets held for rental income or capital appreciation. They are accounted for under IAS 40 (IFRS) and ASC 360 (GAAP), with two key measurement models: Fair Value Model (where gains/losses are recognized in P&L) and Cost Model (where assets are depreciated over time). Proper accounting ensures accurate financial reporting and compliance with regulations.

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Accounting for Investment Properties

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  1. Accounting for Investment Properties Presented by: EXO Edge

  2. Introduction to Investment Property Accounting ● Definition: Investment properties are real estate assets held for rental income or capital appreciation. ● Examples: Rental apartments, office buildings, shopping centers. ● Accounting Standards: Governed by IAS 40 (IFRS) and ASC 360 (GAAP).

  3. Measurement and Recognition ● Initial Recognition: Recorded at cost, including transaction costs. ● Subsequent Measurement: Two models: ○ Fair Value Model: Property is revalued at market price; gains/losses go to profit & loss. ○ Cost Model: Asset is depreciated over its useful life, impairment losses recognized.

  4. Key Accounting Considerations ● Depreciation & Impairment: Applied only under the cost model. ● Rental Income Recognition: Recognized on a straight-line basis unless another method better represents the lease agreement. ● Revaluation Impact: If fair value is chosen, changes affect financial statements and tax obligations.

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