Investment property under development
Property under development for future use as investment property is classified as investment property under development (development projects) and carried at cost until construction or development is complete, at which point it is reclassified to investment property and revalued at the time of the next appraisal.
In advance of changes in IAS40, land held for development purposes that was accounted for in 2007 under ‘investment property’ is now classified as ‘property under development’. This land is carried at fair value.
All costs directly associated with the purchase and construction of a property and all subsequent capital expenditure connected with the development qualify as acquisition costs and are capitalised. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs starts with the commencement of preparatory development activities giving rise to payments and interest charges. Capitalisation of borrowing costs continues until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. An impairment test is carried out prior to completion if there are indications of impairment. The interest rate used is based on the actual rate payable on the specific financing or, if part of the development cost is financed out of general funds, an average interest rate.
Source: Annual Report 2008, Chapter Financial Statements, page 155 (PDF, 179 kB)
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