Vicinity Centre VCX: Accounting Treatment for Investment Property

ACCOUNTING STANDARDS

Vicinity Centre VCX
Executive summary
Below we have discussed the financial and the administrative workings of Vicinity Centre
VCX which is an ASX Listed real estate investment trust. It mainly deals with renting out the
properties in form of land and building to the tenants. We have also highlighted the effects of
changes in retail market on the business as a whole and later on the company VCX. Annual
Report has been the main source of our report.
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Vicinity Centre VCX
Answer-a
The accounting treatment for investment property is prescribed under AASB 140- Investment
Property. This AASB 140 deals with recognition, measurement and disclosure of the
investment property. The term investment property basically denotes the property including
land and building that are held for the purpose of earning rental income or for the purpose of
capital appreciation or may be both reasons but is not meant to be sold.
The main specifications of this AASB 140 include measurement of investment property on
the basis of fair value model or the cost model whichever is appropriate in the desired case,
permitting the property interest to be included in the investment property value provided it
meets out the specified requirements under AASB 140, making full fledged disclosures
wherever required, etc,
Further, as per this standard, the investment property is recognised as an asset in the financial
statements only if the two conditions are fulfilled :
i. It is assured that the property will reap future economic benefits and these will be
received by the entity in near future, and
ii. The cost of the investment property can be calculated accurately and must be
reliable.
The company VCX investment properties include freehold and leasehold held properties in
form of land and buildings. These are held to earn rental incomes. These properties are
recorded at their purchase cost and any other related costs specifically incurred to acquire it.
Hence, the policy to record land & building of the company is to record it at cost plus
incidental cost incurred (Vicinity, 2017). The company also determines the current market
values of the properties at the rear end by the values submitted by the valuation person and
are thus carried at fair values (Peirson et. al, 2015). Any significant and material work in
progress cost is also added up to the cost of the properties.
With regard to the regulation, the process of valuation is governed by the Board and also the
Investment Committee of the internal management. The key executive lives are also involved
in the process. The review of this process is done on a periodic basis considering any
regulatory changes or any changes in market conditions, etc (Brigham & Daves, 2012).
The following treatment is also given to following situations or valuations.
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