32.1 Accounting policy
Investment property is held to earn rental income or obtain benefits from increases in value, or both. Investment property is not used in operating activities.
Investment property is initially recognized at purchase price or production cost, plus transaction costs. After initial recognition it is measured at fair value, in accordance with the rules described in section 9.1.6. Gains and losses resulting from the change of fair value of investment property are recognized in the consolidated profit and loss account under “Net movement in fair value of assets and liabilities measured at fair value” item in the period in which they occurred.
If owner-occupied property becomes investment property, depreciation is charged up to the date of reclassification and impairment losses, if any, are recognized and then:
On subsequent disposal of the investment property, revaluation reserve may be transferred to supplementary capital.
32.2 Estimates and assumptions
The COVID-19 pandemic has impact on the real estate market, bringing down the transaction volume and liquidity. Limited market activity was observed in all real estate market sectors. As at 31 December 2020 (valuation date of a major part of the PZU Group’s investment property portfolio), some real estate market sectors started to function normally, which was reflected in the valuation.
The impact of the factors having a significant impact on the investment property valuations is presented in section 22.214.171.124.
32.3 Quantitative data
|Movement in investment property||1 January – 31 December 2020||1 January – 31 December 2019|
|Net book value at the beginning of the period||1,981||1,697|
|Posting of right-of-use assets as at the time of application of IFRS 16||-||45|
|- increase in right-of-use assets||14||-|
|- transfers from real estate for own use||-||3|
|- transfers from held for sale categories under IFRS 5||296||17|
|- sale and liquidation||(2)||(14)|
|- transfers to categories earmarked for sale according to IFRS 5||(257)||(16)|
|- decrease of right-of-use assets||(1)||-|
|Gain (loss) on remeasurement to fair value||234||54|
|- recorded in financial result||233||46|
|- through other comprehensive income||1||8|
|Net carrying amount at the end of the period, including||2,493||1,981|
|- buildings and structures||2,262||1,798|
|- own land||170||135|
|- perpetual usufruct right to land and cooperative ownership right to premises||61||48|
The item “Perpetual usufruct of land” contains the right to use land for up to 99 years. This right may be traded.
The item “transfers from owner-occupied property” contains the value of properties at their carrying amounts (historical cost less accumulated depreciation and impairment losses) as at the date of transfer, which is the date of the change of use.
The fair value of investment property results from valuations by independent appraisers conducted mainly in 2020.