Land or building, or part of a building, or both, held by the owner or the lessee under a finance lease to earn rentals and/or for capital appreciation, rather than for use in production or supply of goods and services or for administrative purposes or for sale in the ordinary course of business.
What are some examples for investment properties?
- Any vacant building owned by the entity which is leased out to unrelated third party under an operating lease.
- Land held by the entity which does not have any determined future use.
The above properties qualify as investment properties as they are either held for rental or for capital appreciation purposes as opposed to properties that are used for the production of goods. If the entity had a property which was used as a manufacturing facility it would be accounted as a long-lived asset under IAS 16, Property, Plant, and Equipment.
(References: IAS 40, Wiley IFRS: Practical Implementation Guide and Workbook)