Dataline: Investment property entities -- The good, the bad and the ugly (No. 2011-34)

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Dataline / In depth 11/17/2011 by Assurance services
Dataline: Investment property entities -- The good, the bad and the ugly (No. 2011-34)

At a glance

On October 21, 2011, the FASB issued an exposure draft related to investment property entities ("IPEs"). The proposal could impact financial reporting not only for traditional real estate investors, but also non-traditional real estate/integral equipment owners, such as power plants, cell towers, and pipelines. In this Dataline, we share our insight and analysis of the proposal.

On October 21, 2011, the FASB issued an exposure draft related to investment property entities ("IPEs"). The proposal could impact financial reporting not only for traditional real estate investors, but also non-traditional real estate/integral equipment owners, such as power plants, cell towers, and pipelines. Comments on the proposal are due on January 5, 2012.

The proposed standard is similar to and interacts with the currently proposed standard on accounting for investment companies. If an entity meets the IPE definition, which may be the most challenging part of the proposal, it would apply the IPE guidance. If not, it would assess whether it is an investment company. For entities that qualify as IPEs, investment property would be recorded at fair value, with changes in fair value recognized in net income. While this would be a significant change for entities currently reporting under historical cost, the proposal may also impact entities reporting under fair value today. Many real estate funds that currently report their investments at fair value may not meet the definition of an IPE or an investment company.

This Dataline shares our insight and analysis of the proposal.