Converting inventory to investment property involves reclassifying the inventory as an investment property on the balance sheet. The process of converting inventory to investment property is different depending on the accounting model used to value the inventory.
If the inventory is valued at cost, the process of converting it to investment property would involve the following steps:
Determine that the inventory meets the definition of an investment property. According to IFRS, an investment property is an asset that is held to earn rentals or for capital appreciation or both and is not occupied by, or is held for, the owner's use.
Devalue the inventory. The inventory should be written off the balance sheet at its carrying value and the resulting loss should be recognized in the income statement.
Recognize the investment property. The asset should be recognized at its fair value as of the date of reclassification on the balance sheet as an investment property.
Measure the investment property at cost. The investment property should be measured at cost less accumulated depreciation and impairment losses, if any.
Disclose the reclassification. The reclassification should be disclosed in the notes to the financial statements, including the reason for the reclassification, the carrying amount of the inventory before and after reclassification, and the fair value of the investment property as of the date of reclassification.
It's worth noting that, the fair value should be the best estimate of what the price would be received to sell the asset in an arm's length transaction, taking into account the location, condition and the rental income etc.
It's important to consult with your auditor to ensure that the reclass
