IAS 40 para 57, future effect of amendment, transfers to and from investment property

Grainger plc – Annual report – 30 September 2018
Industry: investment property
1. Accounting policies (extract)
(c) Adoption of new and revised International Financial Reporting Standards and interpretations (extract)
1) IAS 40 Investment Property (effective 1 October 2018)
The amendment to IAS 40 widens the scope for transfers to and from investment property. Previously the standard provided an exhaustive list to evidence a change in use that would permit a transfer. This is now a non-exhaustive list of examples of circumstances that could represent a property’s change in use.

A change in management’s intention does not alone constitute a change in use. Transfers to and from investment property can only occur when the property meets or ceases to meet the definition of an investment property and there is evidence of change in use.

On transition, the Group is required to assess property classifications across its entire portfolio held at the effective date (1 October 2018) and, if applicable, reclassify property to reflect the conditions as at that date.

A review of the Group’s property portfolio held as at 30 September 2018 has been undertaken. Trading property with a cost of £75.9m and market value of £78.8m has been identified as requiring reclassification to investment property. There have been no properties identified that are classified as investment property that would be reclassified as trading property.

There will be limited impact to the market value balance sheet and related metrics including EPRA NAV, EPRA NNNAV and LTV as these already reflect the market value of properties. There will however be a valuation uplift of £2.9m taken through the statutory income statement, impacting statutory net profit before and after tax, as well as statutory earnings per share. The adjusted earnings of the Group, a non-statutory measure, will not be impacted.