Consolidated financial statement of JSW S.A. Capital Group for 2012

2.6. Investment property

Investment property includes property that is held to earn rentals or for value appreciation or both and property that is being constructed or developed for future use as investment property.

Investment property does not include any facilities that are used in the production or supply of goods or services or for administrative purposes and property held for sale in the ordinary course of business.

Investment property is initially measured at purchase cost or manufacturing cost, including the costs of transaction and external financing. External financing costs incurred for the construction or production of investment property are capitalized as part of the manufacturing cost. External financing costs are capitalized in the period when the purchase transaction was completed or in the property construction period until the construction is completed and adapted for use.

After initial recognition, the Group measures all investment property according to the purchase price or manufacturing cost model.

Investment properties are depreciated using the straight-line method over their useful life, taking their residual value into account. The estimated useful life of investment property is the same as for property, plant and equipment.

In a situation where the use of any property changes, as evidenced by the property being adapted for sale, the investment property is transferred to the inventories item. If the Group decides to sell the property before it is adapted then it will treat the property as investment property until it is removed from the accounting ledgers. Therefore, it is never classified in inventories.

Investment properties are removed from the ledgers when sold or withdrawn from use permanently, provided that no benefits from its disposal are expected in the future.