A property could be partly owner-occupied and partly held for rental income or capital appreciation. For example, an entity might own a four-storey block and use the bottom two storeys for its administrative function, whilst renting out the upper two floors. If the entity could sell floors separately or lease them out on a finance lease, it should treat the lower half of the property as owner-occupied property (IAS 16) and the upper half as investment property (IAS 40). The whole building is treated either as an investment property or as owner-occupied property where the portions could not be sold or leased out separately on a finance lease. If an insignificant portion is owner-occupied, the whole building can be classified as an investment property.

Accounting for multi-purpose properties Entity A owns a hotel resort, which includes a casino, housed in a separate building. The entity operates the hotel and other facilities on the hotel resort, with the exception of the casino, which can be sold or leased out under a finance lease. The casino will be leased to an independent operator. Entity A has no further involvement in the casino. The casino operator will not be prepared to operate it without the existence of the hotel and other facilities. Management should classify the hotel and other facilities as property, plant and equipment and the casino as investment property. The casino can be sold separately or leased out under a finance lease. If the casino could not be sold or leased out separately on a finance lease, the whole property would be treated as an owner-occupied property.

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