Disclosure of net gains or losses from fair value adjustments is required, but the presentation in the income statement is not specified. They are, however, shown separately from rental income and direct operating expenses, which are required to be disclosed separately.

Presentation of fair value gains and losses Fair value gains and losses would form part of the operating results of an investment property. Gains and losses on revaluation are shown before the line item for ‘finance costs’ if a line item for operating profit is not disclosed. Finance costs are generally not part of operating profits, unless the entity is a financial business. IAS 1 stipulates the minimum information to be presented on the face of the income statement. This does not include gains or losses on revaluation, but IAS 1 states that additional line items, headings and subtotals should be presented on the face of the income statement where such presentation is relevant to an understanding of an entity’s financial performance. Where material, gains or losses on revaluation should be shown as a net figure separately on the face of the income statement. Where such net figure comprises losses and gains that are individually of such significance that their separate disclosure is relevant to explaining the performance of the entity for the period, further analysis of the net figure between gains and losses should be given in the notes.

IFRS 16 prescribes accounting for rental income.

Rental income is normally presented as part of total revenue. IFRS 16 requires disclosure of contingent rents recognised in the period, together with disclosure of operating lease payments receivable each year for the first five years and the total amount receivable in more than five years. A lessor must also disclose qualitative and quantitative information to assess the effect of leases; this could include the nature of the lessor’s leasing arrangements and how it manages its residual risk in leased assets.

Investment property is presented as a separate line item on the face of the balance sheet within non-current assets.

The standard contains extensive disclosure requirements for all investment property. There are additional disclosure requirements in IFRS 16 which apply to leased properties.

An entity that uses the fair value model for its investment property needs to comply with the disclosure requirements of IFRS 13 as well as the disclosures required by IAS 40.

Reconciliation of movements in carrying amount

In addition to the general disclosure requirements set out, an entity that applies the fair value model is required to present a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing the following:

• additions, disclosing separately those additions resulting from acquisitions, those resulting from subsequent expenditure recognised in the carrying amount of an asset and those resulting from acquisitions through business combinations;
• assets classified as held for sale, or included in a disposal group classified as held for sale, under IFRS 5 and other disposals;
• net gains or losses from fair value adjustments;
• the net exchange differences arising on the translation of the financial statements into a different presentation currency and on the translation of a foreign operation into the presentation currency of the entity;
• transfers to and from inventories and owner-occupied property; and
• other changes.

Reconciliation of adjustments to the valuation of property

When a valuation obtained for investment property is adjusted significantly for the financial statements (e.g. to avoid double-counting of assets or liabilities that are recognised as separate assets and liabilities), the entity is required to present a reconciliation between the valuation obtained and the adjusted valuation included in the financial statements, showing separately the aggregate amount of any recognised lease obligations that have been added back, and any other significant adjustments.

Details about property exceptionally stated at cost

In the exceptional circumstances referred to, when an entity applying the fair value model measures investment property using the cost model in IAS 16 or following IFRS 16, the reconciliation described should disclose amounts relating to that investment property separately from amounts relating to other investment property. In addition, the following should be disclosed:

• a description of the investment property;
• an explanation of why fair value cannot be measured reliably; and
• if possible, the range of estimates within which fair value is highly likely to lie.

On disposal of such investment property not carried at fair value, the following should be disclosed:

• the fact that the entity has disposed of investment property not carried at fair value;
• the carrying amount of that investment property at the time of sale; and
• the amount of gain or loss recognised.

Cost model

In addition to the general disclosure requirements set out, an entity that applies the cost model is required to disclose:

• the depreciation methods used;
• the useful lives or the depreciation rates used; and
• the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period.

An entity that applies the cost model is also required to provide a reconciliation of the carrying amount of investment property at the beginning and end of the period, showing:

• additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised as an asset;
• additions resulting from acquisitions through business combinations;
• assets classified as held for sale, or included in a disposal group classified as held for sale, in accordance with IFRS 5 and other disposals;
• depreciation;
• the amount of impairment losses recognised, and the amount of impairment losses reversed, during the period in accordance with IAS 36;
• the net exchange differences arising on the translation of the financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the entity;
• transfers to and from inventories and owner-occupied property; and
• other changes.

An entity that applies the cost model is also required to disclose the fair value of its investment property. In the exceptional cases described, when an entity cannot measure the fair value of the investment property reliably, it should disclose: a description of the investment property;

• an explanation of why fair value cannot be measured reliably; and
• if possible, the range of estimates within which fair value is highly likely to lie.

Effective date and transition for amendments arising from IFRS 16

The consequential amendments to IAS 40 arising from IFRS 16 are required to be applied when an entity applies IFRS 16.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.