AASB 13, AASB 116 and AASB 140 Summarised: What Each Standard Requires for Property Valuation

Three accounting standards govern how property appears in Australian financial statements: AASB 13 (how fair value is measured), AASB 116 (owner-occupied property, plant and equipment) and AASB 140 (investment property). Accountants, auditors and CFOs search for plain-English summaries of all three constantly — and most of what exists is either the full standard or a firm’s technical alert. This article is the reference we give our own financial reporting clients: what each standard requires, how often property must be revalued, and what the standards actually say — verbatim, with paragraph references — about independent valuers.

What are AASB 13, AASB 116 and AASB 140?

AASB 13, AASB 116 and AASB 140 are the Australian Accounting Standards that determine how property assets are measured and disclosed in financial statements. AASB 13 Fair Value Measurement defines what fair value is and how to measure it for any asset; AASB 116 Property, Plant and Equipment governs owner-occupied property and allows a choice between cost and revaluation models; AASB 140 Investment Property governs property held to earn rentals or for capital appreciation, with a choice between cost and fair value models. Each incorporates its IFRS equivalent (IFRS 13, IAS 16, IAS 40) with Australian-specific paragraphs prefixed “Aus”.

Quick reference: the three standards side by side

AASB 13 Fair Value Measurement — summary

AASB 13 defines fair value as the price that would be received to sell an asset (or paid to transfer a liability) in an orderly transaction between market participants at the measurement date. It does not decide when property is measured at fair value — AASB 116 and AASB 140 do that — but once fair value applies, AASB 13 dictates how it is measured and disclosed.

Its centrepiece is the three-level fair value hierarchy, ranked by the observability of inputs:

• Level 1 — quoted prices in active markets for identical assets. Property almost never qualifies: no two properties are identical.
• Level 2 — observable inputs other than quoted prices. Standard residential, commercial and retail property valued from comparable sales evidence typically sits here.
• Level 3 — significant unobservable inputs: discounted cash flow models, market rent assumptions, capitalisation rate selections. Specialised assets — industrial sub-types, agricultural holdings, purpose-built facilities — usually land here.

The hierarchy level drives the disclosure burden: Level 3 measurements require quantitative information about the significant unobservable inputs used, which is where auditor scrutiny concentrates.

AASB 116 Property, Plant and Equipment — summary

AASB 116 covers property occupied by the entity itself — offices, factories, depots — along with plant and equipment. After initial recognition at cost, entities choose one of two models, applied to an entire class of assets (no cherry-picking individual buildings):

• Cost model — carrying amount = cost less accumulated depreciation and impairment.
• Revaluation model — carrying amount = fair value at revaluation date less subsequent depreciation, with revaluations made “with sufficient regularity” so the carrying amount does not differ materially from fair value.

Two points are routinely misstated about AASB 116:

1. There is no prescribed revaluation interval. The standard’s test is materiality of the difference, not the calendar. In practice, annual revaluations suit assets with volatile values, while a three-to-five-year cycle with interim reviews can satisfy the standard where values move little — but “every three years” is industry practice, not a rule in the standard.
2. Revaluation gains do not go through profit or loss (except to the extent they reverse a previous decrease recognised in profit or loss). Increases are recognised in other comprehensive income and accumulate in the asset revaluation surplus in equity.

AASB 140 Investment Property — summary

AASB 140 covers property held to earn rentals or for capital appreciation — the operating standard for REITs, property funds, corporates with investment portfolios, and government land holdings. Entities choose the fair value model or the cost model and apply the choice to all investment property, with limited exceptions.

Under the fair value model, fair value changes flow through profit or loss, and the value must reflect market conditions at the end of each reporting period — in effect, an annual re-measurement at minimum, with listed entities commonly revaluing semi-annually or quarterly under continuous-disclosure obligations. Choosing the cost model does not avoid valuation work: fair value must still be disclosed in the notes.

On valuers, the standard is precise, and worth quoting. Paragraph 32:

“An entity is encouraged, but not required, to measure the fair value of investment property on the basis of a valuation by an independent valuer.”

And paragraph 75(e) requires disclosure of:

“the extent to which the fair value of investment property is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed.”

So — do you need an independent valuer?

Not as a matter of law under any of the three standards. But the architecture pushes hard in that direction:

• AASB 140’s paragraph 75(e) makes the absence of an independent valuation a disclosable fact — a line in the financial statements that boards, auditors and lenders read.
• Level 3 measurements under AASB 13 carry quantitative disclosure of unobservable inputs, and audit files need defensible support for capitalisation rates and market rent assumptions. Independent evidence is the cleanest support.
• Directors sign off on the accounts. An independent valuation to RICS Red Book and API standards transfers the technical judgement to a qualified specialist whose workfile is built for audit review.

That is the honest framing: the standards make independent valuation the path of least resistance for material property holdings, without mandating it.

Not-for-profit and public sector entities

For not-for-profit and public sector entities, AASB 13 as modified for NFP application accepts current replacement cost as a measure of fair value for specialised assets with no active market — courthouses, depots, community facilities — where service potential rather than cash generation is the relevant basis. This underpins the rolling revaluation programs of councils and government agencies, and is the accounting home of depreciated replacement cost (DRC) valuations.

Methodology

• Standard texts: compiled versions on the Federal Register / AASB standards portal — AASB 13, AASB 116 and AASB 140. Paragraph quotes (AASB 140 paras 32, 40, 75(e)) taken from the December 2022 compiled version, read directly.
• Frequency statements distinguish the standards’ own words (“sufficient regularity”; “reflect market conditions at the end of the reporting period”) from industry practice (3-5 year cycles, REIT quarterly revaluations), which is labelled as practice throughout.
• This article summarises measurement and disclosure requirements relevant to property; it is not a complete summary of any standard.

Frequently asked questions

Does AASB 116 require property to be revalued every three years?

No. AASB 116 requires revaluations “with sufficient regularity” so that the carrying amount does not differ materially from fair value — it prescribes no fixed interval. Three-to-five-year cycles are common industry practice for stable asset values, with annual revaluation where values are volatile.

Does AASB 140 require an independent valuer?

No. Paragraph 32 states an entity is “encouraged, but not required” to use an independent valuer. However, paragraph 75(e) requires the financial statements to disclose the extent to which fair value is based on an independent valuation — and to state the fact if there has been none.

What fair value hierarchy level are property valuations?

Almost never Level 1 (no two properties are identical). Standard residential and commercial property valued from comparable sales evidence typically sits at Level 2; specialised assets valued through DCF models, market rent and capitalisation rate assumptions sit at Level 3, which carries the heaviest disclosure requirements.

What is the difference between AASB 116 and AASB 140 for property?

Occupancy and purpose. Property the entity occupies for its own operations falls under AASB 116 (cost or revaluation model; revaluation gains to other comprehensive income). Property held to earn rentals or for capital appreciation falls under AASB 140 (cost or fair value model; fair value gains and losses through profit or loss).

How often must investment property be revalued under AASB 140?

Under the fair value model, the carrying amount must reflect market conditions at the end of each reporting period — annual re-measurement at minimum. ASX-listed entities commonly revalue semi-annually or quarterly given continuous-disclosure obligations. Under the cost model, fair value must still be disclosed in the notes.

What is current replacement cost under AASB 13?

For not-for-profit and public sector entities, current replacement cost — the cost to replace an asset’s remaining service potential — is an accepted measure of fair value for specialised assets with no active market. It is the basis of depreciated replacement cost valuations used in council and government asset revaluation programs.

---

Sources:

• AASB 13 Fair Value Measurement — AASB standards portal
• AASB 116 Property, Plant and Equipment — AASB standards portal
• AASB 140 Investment Property (compiled, Dec 2022) — AASB standards portal

This article is general information about accounting standards as they relate to property valuation — it is not accounting, audit or financial advice. Confirm treatment for your entity with your accountant or auditor. Last verified 9 July 2026. We update this article when the standards are amended.

See also: Financial Reporting Valuations · DRC Valuations · Plant & Equipment Valuations · RICS vs API Standards in Australia · How Commercial Property Is Valued · Australian Property Valuation Statistics 2026