IFRS Accounting for Real Estate

Course Overview

The basic IFRS accounting regime for investments and transactions in real estate (property; land and buildings) is commendably straightforward.  Investments are accounted for on the basis of either depreciated/impaired cost or fair value, while letting transactions are either finance leases or operating leases.  But – as is the case so often with IFRS – the devil is in the detail.

Dissatisfaction with IFRS-based numbers, specifically as a basis for cross-border intercompany comparisons, has increased the importance of the industry-specific non-GAAP performance measures developed by EPRA (European Public Real Estate Association).

This course has three principal objectives.  It is intended:

• to give preparers of accounts a firm basis for practical implementation of the IFRS and EPRA reporting regimes
• to enable senior decision makers of real estate investment companies to make better informed decisions where the exercise of judgement is permitted or required by the accounting standards
• to enable investors and analysts to make better judgements of the financial performance and health of companies engaged in the real estate industry.

The course will be presented on the basis of the accounting standards in force at the time of presentation, but the final session will include a preview of relevant standards which have been published but have not yet come into force, or are still in the process of review and/or replacement.

The course makes extensive use of real-life comparative case studies and of fully worked examples.

Course Content

Overview of the principal provisions of the relevant accounting standards

• IAS 16 Property, plant and equipment
• IAS 17 Leases
• IAS 23 Borrowing costs
• IAS 36 Impairment
• IAS 40 Investment property
• EPRA BPR Best Practice Recommendations

Basic accounting decisions and their implications for preparers and users

• Does the transaction fall under IAS 17?
  • If so, is it a finance or an operating lease?
  • If not, is it an investment property or not?
• Choosing between cost model and fair value model
• Cost model: how to determine
  • Initial cost including borrowing costs and appropriate depreciation schedule
  • Identifying relevant indicators for impairment review
  • Estimating recoverable amount: ‘Value in use’ versus ‘Fair value less costs to sell’
• Fair value model:
  • Estimating fair values (a) of unique assets and (b) in illiquid markets
  • Setting valuation assumptions
  • Trading and development properties

Property leases: some special issues and their impact on the financial statements

• Rent-free periods and other incentives
• Tenants’ improvements
• Step-up rents

Other issues

• Disclosures, especially with regard to management judgements, impairment and revaluations
• EPRA performance measures, and the EPRA-to-IFRS reconciliation
• Transfers between categories
• Preview of pending IFRS changes and their expected impact

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.