Investment property is property (land or a building” or part of a building” or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for: (a)| use in the production or supply of goods or services or for administrative purposes; or| (b)| Sale in the ordinary course of business. | Objective The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.
Based on the annual report from Bonia Holding Bhd, Cheetah Holding Bhd and Padini Holding Bhd, 3 of this company has disclosed the requirement of FRS 140, under paragraph 75. According to the FRS 140, para 75, an entity shall disclose: Criteria| Bonia| Cheetah| Padini| a) whether it applies the fair value model or the cost model. | v| v| v| b) if it applies the fair value model, whether, and in what circumstances, property interests held under operating leases are classified and accounted for as investment property.
| v| N/A| v| c) when classification is difficult (see paragraph 14), the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business. | X| X| X| d) the methods and significant assumptions applied in determining the fair value of investment property, including a statement whether the determination of fair value was supported by market evidence or was more heavily based on other factors (which the entity shall disclose) because of the nature of the property and lack of comparable market data.
| N/A| N/A| N/A| e) the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed. | v| N/A| v| f) the amounts recognised in profit or loss for: (i) rental income from investment property; (ii) direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period;
And (iii) direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period. (iv) the cumulative change in fair value recognised in profit or loss on a sale of investment property from a pool of assets in which the cost model is used into a pool in which the fair value model is used (see paragraph 32C).
| v| v| v| g) the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal. | X| X| X| h) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements. | X| X| X| Bonia Corporation Berhad The balance sheet above stated that the groups had balance of RM 12,127,000 in investment properties, there are no additional investment of property generate for year 2010, thereby the balance of investment property in year 2010 were remain at RM 12,127,000.
Based on the financial note above, Bonia Corporation Berhad use fair value method to computed its investment property. Besides that, providing the amendment made in FRS 140, Investment Property, Bonia Corporation Berhad adopt and amendment it accordingly to the new FRS which clarifies that properties that are being constructed or developed for future use as investment property are within the definition of ‘investment property’.
This amendment further clarifies that if the fair value of such properties cannot be reliably determinable but it is expected that the fair value would be readily determinable when construction is completed, the proper ties shall be measured at cost until either its fair value becomes reliably determinable or construction is completed, whichever is earlier. In order to fullil the disclosures requirements by para 75 in FRS 140, Bonia Corporation Berhad had disclosures the information and the amount of the rental income generated by the investment property which is RM 389, 000 in year 2010.
Cheetah Corporation Berhad From the notes above it shows that, Cheetah Corporation Bhd had use cost model to measure the Investment Property. Cost model are computed by using the cost of investment deduct accumulated depreciation and any impairment loss. The group estimates the fair values of all investment properties based on assumption. They compare the Group’s investment properties with similar properties that were listed for sale within the same locality or other comparable localities.
As required by FRS 140 para 75, the company had disclose the amount of operating expense incurred from the investment property that did not generate rental income which is RM 10,117,000 for year 2010. Due to the Cheetah Corporation Bhd using of cost model for the investment property, thus the disclosures on how the fair value of an investment property been measured, do not need to include in annual report of the company. Padini Holding Berhad Notes from part of the financial Report of Padini Holding Berhad, stated that the company use the fair value to record the Investment Property.
Besides, the company also disclosue that the company recognised an investment property held under an oeprating lease is classified and accounted for as investment property, because the property held under operating lease is used to earn income. On the other hand, Padini Holding Berhad developed its criteria uses to distinguish investment properties and owned-occupied property based on FRS 140. The company classify the criteria by stateted that investment property as below.
Padini Holding Berhad had disclosures on how the fair value of the investment propert being measureto fullfill the critirea of FRS 140. It fair value for the investment property is arrived at by the reference to the market evidence of transaction price for similar properties that were registered by an independpant valuers, Midland Surveyors Limited. The details is shown by below statement: It shows that, the company are using both comparison approach and investment apprach to reflect the fair values of RM 1,870,000 in year 2010.
In order to fullil the disclosures requirements by para 75 in FRS 140, the company had also disclosures the amount of the rental income generated by the investment property, changes in fair value, and the direct operating expenses. In a nutshell in FRS 140, Bonia and Padini Holding Berhad are using the fair value method to recognize its investment property while Cheetah Corporation Berhad using cosr model to rocognize the investment property had fullfill all the discloser requirement in FRS 140, paragraph 75.