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

Grainger plc – Annual report – 30 September 2019
Industry: investment property

1. Accounting policies (extract)

(c) Adoption of new and revised International Financial Reporting Standards and interpretations (extract)
i) IAS 40 Investment Property
The amendment to IAS 40 widened the scope for transfers to and from investment property. Where there is a clear intention by the Group to hold PRS rental assets for the long term, such properties were identified as eligible for potential reclassification from trading property to investment property. Where the Group’s objective to dispose of assets remains valid, for example portfolios where the intention is to dispose of assets gradually to realise maximum economic value for the Group, such assets are deemed as not requiring reclassification, even if their disposal is not deemed to be imminent.

The Group has prospectively applied the amendment and has assessed its property classifications across its entire portfolio at the effective date. Trading property with a cost of £71.5m and market value of £73.4m was reclassified as investment property. Further details are shown in Note 16.

16. Investment property
Accounting policy
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property.

Investment property is measured initially at its cost, including related transaction costs.

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specified asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Investment property falls within Level 3 of the fair value hierarchy as defined by IFRS 13. Further details are given in Note 27.

Subsequent expenditure is included in the carrying amount of the property when it is probable that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred.

Gains or losses arising from changes in the fair value of the Group’s investment properties are included in the consolidated income statement of the period in which they arise.

Where specific investment properties are expected to sell within the next 12 months their fair value is shown under assets classified as held-for-sale within current assets. Any loss on the reclassification of these assets from investment properties to assets held-for-sale is charged to the consolidated income statement of the period in which this occurs.


Information relating to the basis of valuation of investment property, the use of external independent valuers, and the judgements and assumptions adopted by management is set out in Note 2 ‘Critical accounting estimates and judgements’.

The historical cost of the Group’s investment property as at 30 September 2019 is £1,432.9m (2018: £489.4m).

Direct property repair and maintenance costs arising from investment property that generated rental income during the year were £11.3m (2018: £2.8m).