On 14 March 2018, Amendments to IAS 40 Transfers of Investment Property were endorsed by the European Commission for use in the European Union. The EU effective date is the same as the IASB’s effective date (annual periods beginning on or after 1 January 2018).
IThe Amendments to IAS 40 were issued by the IASB in December 2016 to clarify transfers of property to, or from, investment property.
The amendments newly state that an entity shall transfer property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in the management’s intentions for the use of property by itself does not constitute evidence of a change in use.
Examples of evidence of a change in use include:
a. commencement of owner-occupation, or of developmentwith a view to owner-occupation;
b. commencement of development with a view to sale;
c. end of owner-occupation;
d. inception of an operating lease to another party.
An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.
More information about Amendments to IAS 40 can be found in our Accounting Newsletter from January 2017. The full version of the Amendments is available here.
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