the words 'fair value model' under IAS 40 and 'Revaluation model' under IAS 16 are being used interchangably by many. This is wrong. Also, the related words "Revaluation surplus" under IAS 16 and "Gain / loss on fair valuation" under IAS 40 should be used distictively apart. The reason is that the 'revalued amount' is not the same as 'Fair Value'. Revalued amount is FV less accumulated dep and impairment losses. Conceptually, there is no impairment for any asset under IFRS, which is carried at FV. However, revalued amounts may undergo impairment. The difference in treatment is already there in your write-up. FV goes to P/L. Revaluation surplus goes to OCI.
2. IAS 40 has a lot of intricacies. Only LAND held for undetermined future use will fall under IP. IAS 40 believes that buildings can not be held for undetermined future use. Usually, the future use of a building is known.
3. It is incorrect to classify all assets other than IP under IAS 40 to be falling under IAS 16 (Like a residual approach). This may not be so even if we are referring only to tangible assets. There are properties which will come under IAS 2, IAS 11, IAS 17, etc...
4. For example: A property that is held for sale in the ordinary course of business (E.g. real estate dealers and some developers) are inventory under IAS 2.
5. IFRIC 15 deals with important factors which decide whether properties will come under IAS 11 or IAS 2. It is a big topic by itself and hence I restrict myself on IFRIC 15 here.
6. What about properties in the course of construction? If it is for future use as IP, it is classified as IP and all the rules that applies to a completed IP applies to this 'under-construction' property too. (Like fair valuation, etc..). Please note that until 2008, this was to be classified under IAS 16.
7. IAS 40 carries a peculiar provision to capitalize a property held by a LESEE under an operating lease under 2 conditions - a) If it is used as an IP and b) If the entity uses FV model for all its IPs. It is normally not capitalized under IAS 17!!
8. Then, what about transfers among various categories - due to change in use? E.g. IP becoming inventory, inventory becoming PPE, PPE becoming IP, so on and so forth. IAS 40 deals with how to treat the difference in carrying values due to different in measurement bases of these standards and what will be the new cost under the new standard applicable for that asset.
9. Hence the word 'substituted cost' carries more meaning that what is percieved in your write-up.
10. The provisions of IAS 40 and IAS 16 are quite many and is a subejct matter for more than a day's seminar by itself. It is possible that I have missed out some points too.