Investment property fair value disclosure gets skipped because of a straightforward but costly misreading of Ind AS 40: a company applying the cost model doesn't have to remeasure the property's carrying value to fair value each period, but it is still separately required to disclose the fair value in the notes, every period, and preparers who equate "we use the cost model" with "fair value disclosure doesn't apply to us" drop a requirement that was never actually conditional on which measurement model was chosen.
Why the confusion is so persistent
- The fair value model and the fair value disclosure requirement share the same words, making it easy to assume one implies exemption from the other if you're not using it.
- Obtaining a fair value for disclosure purposes under the cost model still typically requires an external valuation, which costs money and effort that's easy to treat as optional if no one specifically flags the requirement.
- A property that hasn't changed hands or been revalued in years creates a false sense that its fair value is "the same as cost" and therefore not worth separately disclosing.
- Smaller companies without a dedicated valuation function may simply not know the disclosure exists independently of the measurement model choice.
Regulatory requirement
Ind AS 40 requires disclosure of the fair value of investment property regardless of whether the cost model or the fair value model is used for measurement — under the cost model, this is a note disclosure only, with no impact on the carrying value or the P&L, but it is not optional.
What this means in practice
A company carrying investment property at cost still needs a current fair value estimate — typically from an external valuer, following Ind AS 113's fair value hierarchy — specifically to support the note disclosure, even when that fair value changes nothing about how the asset sits on the balance sheet.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Fixed assets & capexInd AS 40: investment property, and why it's classified by purpose, not by typeThe same physical building can be investment property or ordinary PPE depending entirely on why the company holds it — the classification question is purpose, not bricks.
- Audit documentationInd AS 113: fair value measurement, and the three-level hierarchy that ranks the inputsFair value isn't one method — it's a framework that ranks how reliable the inputs behind a number actually are, from an observable market price down to a pure internal estimate.
- Fixed assets & capexImpairment testing for fixed assets: a practical approachThe impairment indicators that actually matter for a mid-market client, when a formal test is genuinely warranted, and how to test management's recoverable amount workings.
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