International Accounting Standard IAS-40
content structure
What are IAS and IFRS?
International Accounting Standards (IAS) constitute a set of accounting principles and guidelines adopted worldwide with the purpose of standardizing the presentation of financial information, these standards are issued by the International Accounting Standards Board (IASB) and seek to establish a coherent and understandable framework for the preparation of financial statements, since its application provides users of financial information with a consistent basis to evaluate the economic performance of an entity, regardless of its geographical location or sector of activity, in essence , IAS contribute to transparency and comparability in financial reporting, thereby facilitating informed decision making for both investors and others interested in the financial health of an entity.
They are often confused with IFRS., International Financial Reporting Standards (IFRS) constitute a set of accounting principles and regulations adopted globally With the objective of standardizing and improving the quality of financial information presented by entities, also issued by the International Accounting Standards Board (IASB), these standards seek to guarantee the transparency, consistency and comparability of financial statements, providing investors with , analysts and other users a reliable basis for evaluating the financial performance of an organization, the application of IFRS implies compliance with specific accounting standards in areas such as recognition, measurement, presentation and disclosure of financial transactions, this regulatory framework plays a crucial role in the globalization of financial markets by facilitating the understanding and evaluation of the economic situation of entities, regardless of their geographical location or sector of activity.
Difference between IFRS and the IAS
Usually, not being familiar with the different Standards, it is normal that there may be confusion, both have the purpose of ensuring that the financial statements of a company have the necessary validity and transparency, that they have quality and standardized information, But IFRS, being a new set of rules, tends to complement IAS, among the differences are:
- The scope of your application
- topic coverage
- Level of detail
- mandatory
- The purpose of the standards
What are investment properties?
A investment property refers to a property which is purchased to obtain income and be profitable, that is, generating a return on the investment, through rental income or appreciation, usually these investment properties are acquired by a single investor, by a group or pair of investors who are interested.
How do you know if you are ready to buy an investment property?
Have economic stability: These types of properties, which are usually acquired in order to rent to a tenant, require greater economic stability, since mortgage lenders require that the buyer have at least the 15% down payment. It is necessary to have a budget to start the purchase of the home, changes, remodeling, adjustments, procedures, etc.
Return on investment ROI: It is suggested that you have an approximate calculation of this indicator before purchasing the property, this will give possible projections and will also help with decision making about the sale.
Time: Time is a key factor when purchasing a property, since this type of procedure and proper operation takes a long time, maintaining, advertising, considering potential and interested tenants, supervision and being aware of the laws that you must follow. with your tenant.
What does the International Accounting Standard IAS-40 refer to?
Abbreviated as IAS 40, make reference to investment properties, It was originally issued by the International Accounting Standards Committee in 2000, but in 2001 the International Accounting Standards Board adopted it as IAS 40.
NICs are a set of rules, Created with the purpose of standardizing the preparation and creation of financial statements of an organization, organizations must comply with these rules to support that the financial information presented has official validity and also ensures that this is understood internationally.
Objective of the IAS 40
The primary purpose of Rule 40 is to order and standardize the accounting treatment of investment properties and their information, which must be transparent.
SCOPE OF IAS 40 :
This Standard is intended to be applied in the recognition, measurement and disclosure of investment property.
It is directly related to the measurement in the financial statements of the lessee, as well as the investment properties that are awarded under a financial lease regime and with the so-called measurement in the financial statements of the lessor, as well as investment properties leased under a lease regime. operating lease.
But this Standard does not apply to biological assets of land and that are related to agricultural activity IAS 41.
DEFINITIONS:
investment properties: Refers to a piece of land or building, it can be taken into account in its entirety, in parts or even in both ways, which are owned by the owner or the lessee, who has signed or agreed to a financial lease in order to generate income , goodwill, or both, replacing
(a) The use of production or supply of services or goods or even for administrative purposes; as well as for
(b) the sale in the ordinary course of operations.
Owner-occupied properties: These are properties held (by the owner or by the lessee who has established a lease) for use in the production or supply of goods or services, as well as for administrative purposes.
Fair value: It refers to the amount that can be exchanged for an asset, between buyer-seller, interested and duly informed, who carry out a sovereign and free transaction.
Cost: The amount or means that are proportional and already paid, or the real and fair value of the consideration that will be made, in order to purchase an asset at the time of its acquisition or construction by the organization.
If you want to know more about this type of regulations, visit our BLOG
