Investment property definition
/What is Investment Property?
Investment property is property that an entity holds to earn rental income and/or capital appreciation. It generates cash flows mostly independently of other assets held by an entity. It is not property that an entity uses to supply goods or services, nor is it used for administrative purposes.
Examples of Investment Property
There are many examples of investment property, including the following:
Farmland
Forest land
Commercial properties held for rent or appreciation
Residential properties held for rent or appreciation
Warehouse properties held for rent or appreciation
Mixed-use properties, such as one with retail space on the first floor and residential housing above it
Accounting for Investment Property
If an investment property contains one portion held for either rental income or capital appreciation, and another portion held for other uses, and if the portions could be sold separately, then account for them separately. If it is not possible to do so, then account for the property as an investment only if the portion held for other uses is an insignificant amount of the total asset value.
If an entity provides services to the occupants of a property, it can account for the property as an investment property only if the services it provides are insignificant.
Property held by a lessee under an operating lease may be investment property if it otherwise meets the definition of investment property and the lessee recognizes it under the fair value model. If a lessee classifies such a property as an investment property, then it must account for all of its investment property using the fair value model.