Financial Reporting · Ind AS 40 Investment Property

Transfers to and from Investment Property under Ind AS 40

Updated 5 October 2026 · Fact-checked

A transfer to or from investment property is made only when there is a change in use, supported by evidence. Under the cost model, the carrying amount stays the same on transfer. Under the fair value model, the property is measured at fair value before the transfer, and the difference is booked as Ind AS 16, 2 or 40 requires.

Understand Transfers to and from Investment Property

Ind AS 40 lets you move a property in or out of the investment property category only when its use changes. A change in intention alone, such as management deciding to sell, is not enough. You need evidence that the use has actually changed.

The standard lists the evidence. Commencement of owner-occupation shows a transfer from investment property to owner-occupied property. Commencement of development with a view to sale shows a transfer from investment property to inventory. End of owner-occupation shows a transfer from owner-occupied property to investment property. Commencement of an operating lease to another party shows a transfer from inventory to investment property.

The next question is how much to carry the property at after the transfer. Under the cost model, a transfer does not change the carrying amount of the property, and it does not change its cost for measurement or disclosure. You simply reclassify the same figure from one line to another.

Under the fair value model, the rules depend on the direction. For investment property to owner-occupied property or inventory, the deemed cost for later accounting is the fair value at the date of change in use. For owner-occupied property to investment property, Ind AS 16 applies up to the date of change in use, and any difference between the carrying amount and fair value on that date is treated like a revaluation under Ind AS 16. For inventory to investment property, the difference between fair value and previous carrying amount goes to profit or loss.

A property under construction for future use as investment property is already within Ind AS 40. A property being redeveloped for continued future use as investment property stays investment property and is not transferred. Selling an investment property without redevelopment also does not trigger a transfer to inventory. It remains investment property until derecognised.

Key rules to remember

Triggers for transfer: Investment property → Owner-occupied: start of owner-occupation | Investment property → Inventory: start of development with a view to sale | Owner-occupied → Investment property: end of owner-occupation | Inventory → Investment property: start of operating lease to another party; A change in use must be evidenced. A mere change in management intention is not evidence.
Cost model: Carrying amount after transfer = Carrying amount before transfer; Applies to all directions. Cost and carrying amount do not change, so there is no gain or loss.
Fair value model: Investment property → Owner-occupied or Inventory: Deemed cost for later accounting = Fair value at date of change in use; The property is already at fair value, with changes in fair value recognised in profit or loss up to the date of change.
Fair value model: Owner-occupied → Investment property: Revaluation difference = Fair value − Carrying amount under Ind AS 16 at date of change in use; Treat the difference as a revaluation under Ind AS 16. An increase goes to OCI (revaluation surplus) except to the extent it reverses an earlier loss in profit or loss. A decrease goes to profit or loss except to the extent it uses an existing surplus.
Fair value model: Inventory → Investment property: Profit or loss = Fair value − Previous carrying amount of inventory; Recognised in profit or loss at the date of transfer.

How to solve Transfers to and from Investment Property questions

Use this order for any transfer question. Most marks are for identifying the trigger and the correct model.

1Read the facts and find what actually changed. Look for owner-occupation, development for sale, or an operating lease starting.
2Decide whether the change in use is evidenced, or whether it is only an intention or a continuing use. Redevelopment for continued use as investment property and a plain intention to sell are not transfers.
3Name the direction of transfer: for example investment property to inventory.
4Check the measurement model used for investment property, cost or fair value.
5Under the cost model, carry the same amount across. Under the fair value model, apply the rule for that direction.
6Compute any gain, loss or revaluation difference and decide where it goes: profit or loss or OCI.
7Write the journal entry with the date of change in use and state the deemed cost for later accounting.
8Close with a one-line conclusion naming the paragraph logic: change in use, evidence, measurement.

Quickest way: Trigger, model, direction check

When to use it: Use this when you have a short case MCQ or limited time in a written answer.

Underline the event: owner moves in, development for sale begins, owner moves out, or a lease begins.
If it is cost model, answer: no change in carrying amount, only reclassify.
If it is fair value model and the transfer is out of investment property, use fair value on that date as the new cost.
If it is fair value model and the transfer is into investment property, use the direction rule. For owner-occupied property, treat the difference as an Ind AS 16 revaluation: an increase goes to OCI (except to reverse an earlier loss in profit or loss), and a decrease goes to profit or loss (except to use an existing revaluation surplus). For inventory, the difference goes to profit or loss.
Write the entry in one line and stop.

Common mistakes in Transfers to and from Investment Property

Transferring a property to inventory just because management plans to sell it.
Students link the words intention to sell with inventory.
Fix: Transfer to inventory only when development with a view to sale begins. A property held as investment property and sold without development stays investment property until disposal.
Recognising a gain or loss on transfer under the cost model.
Students apply fair value logic to all transfers.
Fix: Under the cost model, the carrying amount does not change, so no gain or loss arises on transfer.
Taking a loss on transfer from owner-occupied to investment property under the fair value model straight to profit or loss every time.
Students forget that the difference is treated like an Ind AS 16 revaluation.
Fix: Apply the revaluation rules: a decrease goes to profit or loss except to the extent of an existing revaluation surplus, which it reduces through OCI. An increase goes to OCI except to the extent it reverses an earlier loss in profit or loss.
Treating a property under redevelopment for continued use as investment property as a transfer to inventory.
Construction activity looks like development for sale.
Fix: Check the purpose. If the property will continue as investment property after redevelopment, it stays in Ind AS 40 and no transfer is made.
Using the wrong date for fair value.
Students use the year-end or the decision date.
Fix: Use the date of change in use, which is the date of the evidenced event such as the start of owner-occupation.

Worked examples

Example 1

Alpha Ltd uses the cost model for investment property. A building with a carrying amount of ₹8,40,00,000 (cost ₹10,00,00,000 less accumulated depreciation ₹1,60,00,000) has been leased out. On 1 October 2026, the lease ended and Alpha Ltd began occupying the building for its own administration. Fair value on that date is ₹12,00,00,000 (₹12 crore). How should Alpha Ltd account for the change?

Show the solution

The trigger is the commencement of owner-occupation. This is a change in use, so the building moves from investment property to owner-occupied property (PPE under Ind AS 16).
Alpha Ltd uses the cost model, so the transfer does not change the carrying amount or the cost.
The fair value of ₹12 crore is not used to remeasure. It may be relevant for disclosure, but it does not change the books.
Journal entry on 1 October 2026: Dr Property, Plant and Equipment (cost) ₹10,00,00,000, Cr Investment property (cost) ₹10,00,00,000. Also Dr Accumulated depreciation – investment property ₹1,60,00,000, Cr Accumulated depreciation – PPE ₹1,60,00,000. The net amount moved is ₹10,00,00,000 − ₹1,60,00,000 = ₹8,40,00,000. If you present the building net, you can instead transfer the net ₹8,40,00,000 from investment property to PPE.
From this date, depreciate the building under Ind AS 16 using its remaining useful life and residual value.

Answer: Transfer the building to PPE at its carrying amount of ₹8,40,00,000 (cost ₹10,00,00,000 less accumulated depreciation ₹1,60,00,000). No gain or loss arises, and the fair value of ₹12 crore is ignored for measurement.

Example 2

Beta Ltd uses the fair value model for investment property. It occupied an office building as owner under Ind AS 16 (cost model). The carrying amount of the building, after depreciation up to 1 January 2027, is ₹5,00,00,000. On 1 January 2027, Beta Ltd moved out and let it to a third party under an operating lease. Fair value on that date is ₹6,20,00,000. There is no earlier revaluation surplus or loss on this building. How should Beta Ltd account for the transfer?

Show the solution

The trigger is the end of owner-occupation. This is a change in use, so the building moves from owner-occupied property to investment property.
Beta Ltd uses the fair value model, so the building is carried at fair value after the transfer. The carrying amount of ₹5,00,00,000 is already after Ind AS 16 depreciation up to 1 January 2027, so no further depreciation is charged for the period up to the date of change.
Compute the difference: ₹6,20,00,000 − ₹5,00,00,000 = ₹1,20,00,000 increase.
Treat the increase as a revaluation under Ind AS 16. With no earlier loss in profit or loss, the whole increase goes to OCI and accumulates in equity as revaluation surplus.
Journal entry on 1 January 2027: Dr Investment property ₹6,20,00,000, Cr Property, Plant and Equipment (net carrying amount derecognised) ₹5,00,00,000, Cr Other comprehensive income (revaluation surplus) ₹1,20,00,000. If the building is held in the books at gross cost, clear the accumulated depreciation by debiting it and crediting PPE at gross cost, so that the net credit to PPE is still ₹5,00,00,000.
From now on, Beta Ltd measures the building at fair value at each reporting date, and subsequent fair value changes are recognised in profit or loss. The revaluation surplus stays in equity. When the property is disposed of, it can be transferred directly to retained earnings, not through profit or loss.

Answer: Record investment property at ₹6,20,00,000, derecognise the net carrying amount of ₹5,00,00,000 from PPE and credit ₹1,20,00,000 to OCI as revaluation surplus. No amount goes to profit or loss on the transfer.

Exam tips

Always name the evidence for the change in use. Examiners give marks for matching the event to the direction of transfer.
Write the model first. Cost model and fair value model give different answers, so state which applies before computing.
In fair value problems, split the answer into three parts: date, fair value, and where the difference goes (OCI or profit or loss).
Watch for traps in case MCQs: intention to sell, redevelopment for continued use, or sale without development are not transfers.
Show the journal entry with the date. A clean entry usually earns the final mark.

Practice questions from Ind AS 40 Investment Property

Transfers to and from Investment Property in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Transfers to and from Investment Property: frequently asked questions

What is the difference between transfers under the cost model and the fair value model in Ind AS 40?

Under the cost model, the carrying amount does not change on transfer, so there is no gain or loss. Under the fair value model, the property is measured at fair value at the date of change in use for the relevant directions, and the difference is recognised in OCI or profit or loss depending on the direction.