Fair-value property bars depreciation difference, KILA rules

Companies that measure investment property at fair value cannot book a depreciation difference (poistoero) purely to satisfy the tax linkage for depreciation, the Accounting Board (Kirjanpitolautakunta) has now ruledKirjanpitolautakunta. Where the fair value model under Chapter 5, section 2b of the Accounting Act (Kirjanpitolaki, KPL, 1336/1997) applies, no accounting depreciation is recordedKirjanpitolautakunta — and without that base there is no difference on which a poistoero could be builtKirjanpitolautakunta.

The applicant asked two questions: whether good accounting practice allows recognising, alongside the KPL 5:2b fair value model, an increase in the depreciation difference as an appropriation (tilinpäätössiirto) in the income statement and a corresponding poistoero on the balance sheet in an amount matching the tax-deductible depreciation — so as to meet the book-linkage requirement of section 54(2) of the Act on the Taxation of Business Income (Laki elinkeinotulon verottamisesta, EVL, 360/1968) — even though no depreciation is recorded on the property; and whether the increase may in the period exceed the amount actually deducted as tax depreciation that year.

The Board answered no to both.Kirjanpitolautakunta The reasoning starts from what a poistoero is. Under KPL 5:12 it is the gap between depreciation charged in the accounts and depreciation deductible in taxation — the Board's 2007 general guidance on planned depreciation defines it as total depreciation minus planned depreciation, a device reconciling book and tax depreciation. Conceptually it therefore presupposes that the asset's acquisition cost is being depreciated in the books at all.

That presupposition fails under the fair value model. KPL 5:2b allows an entity to carry investment property at fair value, following the IAS-endorsed standards (in practice IAS 40) with the fair value fund rules of section 2a(2)–(3); value changes are recognised through profit or loss, and no planned depreciation under KPL 5:5.1 is allocated to the asset. Where no difference between book and tax depreciation arises, there is nothing to recognise as poistoeroKirjanpitolautakunta. Booking one on the sole basis of the tax-deductible amount would put an appropriation in the statements with no corresponding depreciation entry for the period — contrary to the purpose of KPL 5:12 — and would accumulate a balance-sheet poistoero with no accounting depreciation base against which it could ever reverse. Instead of the temporary timing difference the concept assumes, it would become a permanent tax-driven balance-sheet item detached from any book depreciation.

Nor does the Supreme Administrative Court's decision KHO 1995 B 504 help the applicant: it requires tax-deductible depreciation to appear as profit-and-loss entries in the books, but it does not entitle an entity to create a poistoero where the applicable accounting rules neither require nor permit depreciation of the asset. The book-linkage of tax depreciation is therefore no basis for departing from the KPL 5:2b modelKirjanpitolautakunta. The same Finance Ministry analysis the opinion cites (VM 2025:52) acknowledges the resulting tension between IFRS-based statements and the EVL profit-computation rules, while proposing no immediate change to the tax treatment of investment property.

Because no poistoero can be recognised at all, the second question lapses: an increase exceeding the year's tax depreciation is equally impermissibleKirjanpitolautakunta. The practical consequence is a trade-off practitioners must price in before electing the fair value model — the election closes the poistoero route to claiming book-linked tax depreciation on that propertyKirjanpitolautakunta. The Board limits its opinion to the application of the Accounting Act.

Legal basis: Kirjanpitolaki (1336/1997) 5:2b, 5:5.1 and 5:12; Laki elinkeinotulon verottamisesta (360/1968) 54.2 §; Kirjanpitolautakunta opinion 2149 of 23 September 2026.