Transfer of building from PPE to investment property

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Giannos
Posts: 34
Joined: 09 May 2022, 09:26

Transfer of building from PPE to investment property

Post by Giannos »

I have a question about the transfer of properties from PPE to Investment property.
A building which was initially recognized in PPE at cost, it was revalued to its market value some years after and its revaluation gain was posted to a revaluation reserve through other comprehensive income. After this revaluation, the building is depreciating based on its new value and the part of the additional depreciation which derives from the revaluation is transferred every year from the revaluation reserve to retained earnings.
My question is, in the case of transfer of the building from PPE to investment property due to the change of its use, what will be happened to the revaluation reserve.
Shall it remain in the other reserves until the disposal of the building in the future or it should be transferred to the retained earnings at the time of the transfer from PPE to Investment Property?

Thank you a lot in advance.
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Marek Muc
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Re: Transfer of building from PPE to investment property

Post by Marek Muc »

IAS 40.62 (b)(ii)
any remaining part of the increase is recognised in other comprehensive income and increases the revaluation surplus within equity. On subsequent disposal of the investment property, the revaluation surplus included in equity may be transferred to retained earnings. The transfer from revaluation surplus to retained earnings is not made through profit or loss.
Giannos
Posts: 34
Joined: 09 May 2022, 09:26

Re: Transfer of building from PPE to investment property

Post by Giannos »

Thank you a lot Mark!
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