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Disclosures
Extract from FRS 102 Section 16.10-16.11
16.10 An entity shall disclose the following for all investment property accounted for at fair value through profit or loss (paragraph 16.7):
(a) the methods and significant assumptions applied in determining the fair value of investment property;
(b) 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 class of the investment property being valued. If there has been no such valuation, that fact shall be disclosed;
(c) the existence and amounts of restrictions on the reliability of investment property or the remittance of income and proceeds of disposal;
(d) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements; and
(e) a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing separately:
(i) additions, disclosing separately those additions resulting from acquisitions through business combinations;
(ii) net gains or losses from fair value adjustments;
(iii) transfers to property, plant and equipment when a reliable measure of fair value is no longer available without undue cost or effort (see paragraph 16.8);
(iv) transfers to and from inventories and owner-occupied property; and
(v) other changes.
This reconciliation need not be presented for prior periods.
16.11 In accordance with Section 20 Leases, an entity shall provide all relevant disclosures required in that section about leases into which it has entered.
OmniPro comment
Detailed below is an illustration of the various disclosure requirements which would meet the requirements above.
Example 5 – Extract from an accounting policy & notes in the financial statements
Investment properties
The group owns a number of freehold office buildings that are held to earn long term rental income and for capital appreciation. Investment properties are initially recognised at cost. Investment properties whose fair value can be measured reliably are measured at fair value. Changes in fair value are recognised in the profit and loss account.
Example 6: Extract from the notes to the financial statements – note on investment property
| 12 Investment properties | 2015 | 2014 |
| CU | CU | |
| Investment property at fair value at 1 January | 1,000,000 | 1,000,000 |
| Additions (see note (i) below) | 200,000 | – |
| Additions as a result of acquisitions | 50,000 | – |
| (Decrease)/uplift in fair value (see note (ii) below) | (100,000) | 200,000 |
| Transfer to property, plant and equipment (see note (iii) below) | (50,000) | – |
| Transfer to property, plant and equipment (see note (iv) below) | 50,000 | – |
| Disposal | (50,000) | – |
| Investment property at fair value at 31 December | 1,100,000 | 1,200,000 |
- During the year the company completed the construction of a number of units which are now rented to third parties. As a result these units were transferred at cost from inventory to investment properties.
- The land and buildings of the company were valued by [state name], [state qualification] to open market value reflecting existing use [or state alternate basis if appropriate] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}. The critical assumptions made relating to the valuations are set out below:
| 2015 | 2014 | |
| Yields | X% | X% |
| Inflation rate | X% | X% |
OR WHERE APPLICABLE WHERE NO VALUATION WAS COMPLETED AT THE YEAR END
The land and buildings of the company were valued by [state name], [state qualification] to fair value reflecting existing use [or state alternate basis if appropriate] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}. An updated valuation was not performed by the company as the directors believe the valuation performed in XXX is not materially different from the carrying valye at 31 December 2015.
iii. At 31 December 2015, the company could no longer reliably estimate the fair value of the investment property held at XXX due to market conditions in that location. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from investment property and reclassified to property, plant and equipment at the carrying amount of €50,000 and is depreciated from that date.
OR
At 31 December 2015, the company could no longer estimate the fair value of the investment property without undue cost and effort, therefore, the property has been transferred from investment property and reclassified to property, plant and equipment at the carrying amount of €50,000 and is depreciated from that date.
iv. At 31 December 2015, a property which met the definition of investment property but which could not be classified as investment property due the inability to reliably measure its fair value due to market conditions can now be reliably measured. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from property, plant and equipment and reclassified to investment property at its fair value at that date with the uplift recognised in the profit and loss.
OR
At 31 December 2015, a property which met the definition of investment property but which could not be classified as investment property due the inability to reliably measure its fair value without undue cost or effort can now be reliably measured. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from property, plant and equipment and reclassified to investment property at its fair value at that date with the uplift recognised in the profit and loss.
v. All investment property has been pledged as security on loans taken out by the company.
vi. The historical cost of the investment properties is as follows:
| At 31 December 2015 | 600,000 |
| At 31 December 2014 | 800,000 |
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