IPSAS 16
Active
Investment Property
Prescribes accounting for investment property – recognising, measuring (current value model by default, with an historical-cost option forproperties that cannot be measured reliably), transferring the asset, and the linked-liability exception. Effective 1 January 2008.
Active Standard
IPSAS 16 Investment Property is the current, active standard issued by the IPSASB for accounting for investment property. It is effective for annual financial statements covering periods beginning on or after 1 January 2008 (earlier application encouraged).
IPSAS 16 is based on IAS 40 Investment Property, adapted for the public sector with a linked-liability exception and explicit commentary on the defining feature that investment property generates cash flows largely independently of an entity's other assets.
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Objective, Scope & Definitions (paras. 1–7)
Objective & scope
Prescribes the accounting treatment for investment property and related disclosures.
Biological assets related to agricultural activity (IPSAS 27 / IPSAS 45) Mineral rights and mineral reserves (oil, natural gas, similar non-regenerative resources)
Paras. 3–5 [Deleted].
Key definitions (para. 7)
Investment property
Property (land, a building, part of a building, or both – held by the owner OR by a lessee as a right-of-use asset) held to earn rentals or for CAPITAL APPRECIATION, or both – rather than for use in production/supply of goods and services, administrative purposes, or sale in the ordinary course of operations.
Owner-occupied property
Property held for use in the production or supply of goods/services, or for administrative purposes.
The defining feature: investment property generates cash flows largely INDEPENDENTLY of an entity's other assets – unlike owner-occupied property, where cash flows are attributable to the property AND the other assets used alongside it (para. 10).
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Classification – Investment vs Owner-Occupied Property (paras. 9–19)
Examples of investment property (para. 12)
Land held for long-term capital appreciation (not short-term sale) Land held for a CURRENTLY UNDETERMINED future use – defaults to "held for capital appreciation" A building (owned or right-of-use) leased out under one or more operating leases on a commercial basis A vacant building held to be leased out commercially Property being constructed/developed for future use as investment property
NOT investment property (para. 13)
Property held for sale in the ordinary course of operations, or under construction for such sale (IPSAS 12, Inventories) Owner-occupied property, including future/under-development owner-occupied property and employee housing (e.g. military personnel quarters) Property leased to another entity under a FINANCE lease Property held to provide a SOCIAL SERVICE that incidentally generates cash inflows (e.g. below-market-rent low-income housing) – accounted for under IPSAS 45 instead Property held for STRATEGIC purposes – accounted for under IPSAS 45
Whole-of-government consolidation wrinkle (para. 19)
A property management entity that owns a building leased to ANOTHER government entity treats it as investment property in ITS OWN individual financial statements. But in the WHOLE-OF-GOVERNMENT consolidated statements, that same property is owner-occupied from the economic entity's perspective – reclassified as PP&E under IPSAS 45.
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Mixed-Use Property & Ancillary Services (paras. 14–18A)
Split-use buildings (para. 14)
Portions could be SOLD (or finance-leased) SEPARATELY → account for each portion separately Portions CANNOT be sold separately → the whole is investment property ONLY IF the owner-occupied portion is INSIGNIFICANT
Example: a hospital or university building, part administrative and part leased out commercially as apartments.
Ancillary services – the significance test (paras. 15–17)
Service levelClassification
Insignificant (e.g. security/maintenance for a commercially-rented office building)Still INVESTMENT PROPERTY
Significant (e.g. a government-managed hotel/hostel)OWNER-OCCUPIED property instead
Judgment is needed where a management contract sits between "passive investor" and "outsourced day-to-day functions with retained cash-flow exposure" (para. 17). Disclosure of the classification criteria is required when classification is difficult (para. 86(c)).
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Recognition & Measurement at Recognition (paras. 20–38A)
Recognition criteria (para. 20)
Probable that future economic benefits/service potential will flow to the entity Cost or fair value can be measured reliably
Costs of DAY-TO-DAY servicing (labor, consumables, minor parts) are expensed, not capitalized (para. 24). Replacement parts are capitalized when recognition criteria are met, with the replaced part's carrying amount derecognized (para. 25).
Initial measurement
Owned investment property → measured initially at COST (incl. transaction costs)
Acquired via a NON-EXCHANGE transaction (e.g. transferred at no charge, or via sequestration powers) → cost = fair value at the acquisition date Cost is NOT increased by start-up costs (unless necessary), pre-occupancy operating losses, or abnormal wasted resources (para. 30) Deferred payment → cost = cash price equivalent; the difference is INTEREST EXPENSE over the credit period (para. 31) Acquired via a non-monetary asset EXCHANGE → measured at fair value UNLESS the exchange lacks commercial substance or neither asset's fair value is reliably measurable (para. 36)
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Measurement After Recognition – Policy Choice (paras. 39–41C)
One policy, applied to ALL investment property
An entity chooses EITHER the current value model OR the historical cost model, and applies it to ALL its investment property (para. 39). A voluntary switch FROM current value TO historical cost is highly unlikely to ever meet IPSAS 3's "more relevant information" test (para. 40).
Fair value must be measured for ALL investment property regardless of model chosen – either as the MEASUREMENT basis (current value model) or for DISCLOSURE (historical cost model) (para. 41) An independent, appropriately-qualified valuer is ENCOURAGED but not required
Linked-liability exception (para. 41A): an entity MAY choose a different model for investment property backing liabilities that pay a return linked directly to the fair value of specified assets, versus all OTHER investment property. Sales BETWEEN pools using different models are recognized at fair value, with the cumulative fair-value change hitting surplus/deficit (para. 41C).
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Current Value Model (paras. 42–61)
The core rule
All investment property measured at FAIR VALUE; gains/losses from fair value changes → surplus or deficit, in the period they arise
Fair value measurement follows Appendix D of IPSAS 46, reflecting rental revenue from current leases and other market-participant assumptions (para. 49). A right-of-use investment property is measured at the fair value of the RIGHT-OF-USE ASSET, not the underlying asset (para. 49A).
Avoiding double-counting (para. 59)
Integral equipment (elevators, air-conditioning) → included in the property's fair value, NOT recognized separately as PP&E Furnished office let on a furnished basis → furniture's fair value included; not recognized as a separate asset Fair value EXCLUDES prepaid/accrued lease revenue – recognized as a separate asset/liability instead Right-of-use investment property → fair value reflects expected cash flows; any recognized LEASE LIABILITY must be added back if the valuation was obtained net of expected payments
Where the present value of expected payments (other than recognized-liability payments) exceeds expected receipts, apply IPSAS 19 to determine whether a liability should be recognized (para. 61).
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Inability to Measure Fair Value Reliably (paras. 62–64)
A rebuttable presumption – with a narrow exception
There is a REBUTTABLE PRESUMPTION that fair value can be reliably measured on a continuing basis. The presumption can be rebutted only ON INITIAL RECOGNITION (or when a property first becomes investment property) – and only when the market for comparable property is INACTIVE, and no reliable alternative measurement (e.g. discounted cash flow) is available.
Property UNDER CONSTRUCTION
Measure at HISTORICAL COST until fair value becomes reliably measurable, or construction completes – whichever is EARLIER. Once construction completes, fair value is PRESUMED measurable.
Other investment property (rebutted, not under construction)
Measure using the HISTORICAL COST MODEL of IPSAS 45 (owned) or IPSAS 43 (right-of-use), with RESIDUAL VALUE assumed zero – continued until disposal.
Even where one property is measured at historical cost for this reason, ALL OTHER investment property must still be measured at fair value under the current value model (para. 63). Once measured at fair value, an entity CONTINUES at fair value until disposal (or change of use) even if the market later becomes less active (para. 64).
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Historical Cost Model (para. 65)
Routes to three other Standards
CircumstanceApplicable Standard
Meets held-for-sale criteria (or in a disposal group classified as held for sale)IPSAS 44
Held by a lessee as a right-of-use asset, not held for saleIPSAS 43
All other casesIPSAS 45's historical cost model
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Transfers (paras. 66–76)
Transfer trigger – a CHANGE IN USE, evidenced
Commencement of owner-occupation (or development toward it) → investment property → owner-occupied Commencement of development with a view to sale → investment property → inventories End of owner-occupation → owner-occupied → investment property Inception of a commercial operating lease to another party → inventories → investment property
A mere CHANGE IN MANAGEMENT'S INTENTIONS, on its own, does NOT provide evidence of a change in use (para. 66).
Accounting for the transfer (current value model only)
FROM investment property (fair value) TO owner-occupied/inventories → the property's cost for subsequent accounting is its FAIR VALUE at the date of change (para. 71) FROM owner-occupied TO investment property (fair value) → treat any difference between IPSAS 45/43 carrying amount and fair value the SAME as a REVALUATION under IPSAS 45 (paras. 72–73) FROM inventories TO investment property (fair value) → any difference vs. previous carrying amount → SURPLUS OR DEFICIT (para. 74, consistent with inventory sale treatment)
Under the HISTORICAL COST MODEL, transfers change neither the carrying amount nor the cost of the property (para. 70). Self-constructed investment property carried at fair value: on completion (or when fair value first becomes reliably measurable), any difference vs. the previous carrying amount → surplus or deficit (para. 76).
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Disposals (paras. 77–84)
Derecognition & gain/loss
Gain/loss = Net disposal proceeds − Carrying amount, recognized in surplus/deficit in the period of retirement/disposal
Derecognized on disposal, OR when permanently withdrawn from use with no future economic benefits/service potential expected from disposal (para. 77). Disposal can be by sale or by entering into a finance lease; IPSAS 43 governs sale-and-leaseback (para. 78).
Compensation & separate economic events (paras. 83–84)
Third-party compensation for impaired, lost, or given-up investment property → recognized in surplus/deficit when RECEIVABLE Impairments (IPSAS 21/26), retirements/disposals, compensation receivable, and replacement-asset costs are treated as four SEPARATE economic events, accounted for separately
Transaction consideration for a disposal follows IPSAS 47's requirements (paras. 109–132), including subsequent changes to estimated consideration (para. 81).
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Disclosure Requirements (paras. 85–90)
Applies to both models (para. 86)
Which model is applied (current value or historical cost) Classification criteria used, when classification is difficult Extent fair value is based on an independent qualified valuer's valuation (or that fact if none) Rental revenue, direct operating expenses (with/without rental revenue generated) recognized in surplus/deficit Restrictions on realizability or remittance of revenue/disposal proceeds Contractual obligations to purchase, construct, develop, repair, maintain, or enhance investment property
Model-specific: reconciliation & fair value hierarchy
CURRENT VALUE MODEL (PARA. 87) – RECONCILIATION
Opening to closing balance: additions (acquisitions vs. subsequent expenditure), public sector combination additions, held-for-sale/other disposals, net fair-value gains/losses, FX translation differences, transfers, other changes.
HISTORICAL COST MODEL (PARA. 90(E))
Must still disclose FAIR VALUE – or, in the para. 62 exceptional cases, a description, the reason fair value can't be reliably measured, and (if possible) the likely range.
IPSAS 46-based fair value hierarchy disclosures (Level 1/2/3, valuation techniques, unobservable inputs, Level 3 reconciliations) apply per paras. 89A–89C – mirroring the IPSAS 12 fair value package.
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Effective Date & Amendment Timeline
Amendment history at a glance
Base Standard: periods beginning on/after 1 January 2008.
EffectiveChange
Various (pre-2018)Numerous paragraph deletions/amendments through Improvements to IPSAS cycles and The Applicability of IPSAS
1 Jan 2019Paras. 66, 68 – Improvements to IPSAS, 2018 (transfer-of-investment-property amendments, §9)
1 Jan 2025 (IPSAS 43 suite)Extensive amendments integrating the new right-of-use lease model throughout (§4, §6, §8)
1 Jan 2025 (IPSAS 44/45/46 suite)Held-for-sale, PP&E, and fair value measurement cross-references updated
Paragraph 100B–100D provide specific transition guidance for the 2018 transfer-of-investment-property amendments, including a hindsight-free retrospective option and required reclassification disclosures.
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Relationship to IAS/IFRS – Comparison with IAS 40
Comparison – IPSAS 16 vs IAS 40
IPSAS 16 is drawn primarily from IAS 40 (2003), Investment Property, including the IASB's May 2008 Improvements to IFRS. IPSAS 44 (2022) brought forward the IFRS 5-consequential amendments that had previously been excluded pending an IPSASB view on their public sector applicability.
TopicDifference
No/nominal-cost acquisitionIPSAS 16 specifies cost = fair value at acquisition; IAS 40 requires cost measurement generally, without this specific carve-out
Social service propertyAdditional IPSAS 16 commentary clarifying that property held to deliver a social service (incidentally generating cash) is excluded – accounted for under IPSAS 45
Terminology"Statement of financial performance" (IPSAS 16) vs "income statement" (IAS 40); IPSAS 16 does not use "income"
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Statement / Process Mapping
Classification & measurement decision map
- Is the property held to earn rentals or for capital appreciation, generating cash flows LARGELY INDEPENDENT of other assets? → potential investment property (§2)
- Is it held for sale in the ordinary course of business, or owner-occupied? → NOT investment property – see IPSAS 12 or IPSAS 45 instead
- Are ancillary services provided to occupants SIGNIFICANT? → owner-occupied (a managed hotel). Insignificant? → still investment property (§3)
- Which measurement model – current value (fair value, gains/losses to surplus/deficit) or historical cost? Chosen ONCE, applied to ALL investment property (§5)
- Can fair value be reliably measured? If not (rare, on initial recognition only) → historical cost model under IPSAS 43/45 instead (§7)
- Has the USE changed, with evidence? → transfer between investment property, owner-occupied property, and inventories (§9)
Concept-to-statement mapping table
IPSAS 16 conceptStatement(s)Notes
Investment property carrying amountSOFPFair value (current value model) or cost less depreciation (historical cost model)
Fair value gains/lossesSOFPerfCurrent value model only – never to net assets/equity
Transfer FROM owner-occupied (fair value model)NA/E SOFPerfTreated as an IPSAS 45 revaluation
Rental revenue & direct operating expensesSOFPerf NotesDisclosed by category, generating vs non-generating property
Fair value hierarchy & reconciliationNotesIPSAS 46-aligned disclosure package
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Related Standards – Cross-Reference Map
How IPSAS 16 connects across the IPSAS body of literature
StandardNature of the connection
IPSAS 12Property held for sale in the ordinary course of operations is inventory, not investment property (§2, §9)
IPSAS 19Liability recognition where expected payments exceed expected receipts on an investment property (§6)
IPSAS 21 / 26Impairment governs investment property held under the historical cost model (§10)
IPSAS 40Determines whether an investment property acquisition is a public sector combination (§2)
IPSAS 43Right-of-use investment property recognition/measurement, lessor/lessee disclosures, sale-and-leaseback (throughout)
IPSAS 44Held-for-sale classification for investment property under the historical cost model (§8)
IPSAS 45Historical cost model mechanics, and the revaluation-equivalent treatment for owner-occupied-to-investment transfers (§8, §9)
IPSAS 46Fair value measurement methodology (Appendix D) and disclosure hierarchy (§6, §11)
IPSAS 47Transaction consideration determination on disposal of investment property (§10)
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Quick-Reference Glossary
Investment property
Property held to earn rentals or for capital appreciation, rather than for use in operations or for sale.
Owner-occupied property
Property held for use in production/supply of goods/services, or for administrative purposes.
Cost
Cash/cash equivalents paid, or the fair value of other consideration given, to acquire an asset at acquisition or construction.
Carrying amount
The amount at which an asset is recognized in the statement of financial position.
Current value model
Measures all investment property at fair value, with changes recognized in surplus or deficit.
Historical cost model
Measures investment property per IPSAS 43/44/45's historical cost provisions, as applicable.
Financial statement key
SOFP Statement of financial position
SOFPerf Statement of financial performance
NA/E Net assets/equity (statement of changes)