Transfers to or from investment property classification

Transfers to, or from, investment property should only be made when there is a change in use, evidenced by one or more of the following: [IAS 40.57 (note that this list was changed from an exhaustive list to an non-exhaustive list of examples by Transfers of Investment Property in December 2016 effective 1 January 2018) ]

commencement of owner-occupation (transfer from investment property to owner-occupied property)
commencement of development with a view to sale (transfer from investment property to inventories)
end of owner-occupation (transfer from owner-occupied property to investment property)
commencement of an operating lease to another party (transfer from inventories to investment property)
end of construction or development (transfer from property in the course of construction/development to investment property

When an entity decides to sell an investment property without development, the property is not reclassified as inventory but is dealt with as investment property until it is derecognised. [IAS 40.58]

The following rules apply for accounting for transfers between categories:

for a transfer from investment property carried at fair value to owner-occupied property or inventories, the fair value at the change of use is the ‘cost’ of the property under its new classification [IAS 40.60]
for a transfer from owner-occupied property to investment property carried at fair value, IAS 16 should be applied up to the date of reclassification. Any difference arising between the carrying amount under IAS 16 at that date and the fair value is dealt with as a revaluation under IAS 16 [IAS 40.61]
for a transfer from inventories to investment property at fair value, any difference between the fair value at the date of transfer and it previous carrying amount should be recognised in profit or loss [IAS 40.63]
when an entity completes construction/development of an investment property that will be carried at fair value, any difference between the fair value at the date of transfer and the previous carrying amount should be recognised in profit or loss. [IAS 40.65]

When an entity uses the cost model for investment property, transfers between categories do not change the carrying amount of the property transferred, and they do not change the cost of the property for measurement or disclosure purposes