In assessing whether an entity meets the definition described above, it should be considered whether the following typical characteristics of an investment entity are present:

[IFRS 10 para 28].

Further guidance on these characteristics can be found in the PwC Manual of Accounting chapter 27 paragraphs 33–40.

The absence of one or more of these typical characteristics does not necessarily disqualify the entity from being an investment entity. However, it is highly unlikely that the definition of an investment entity will be met without having any of these typical characteristics. [IFRS 10 para BC 234]. The typical characteristics have to be seen as a supplement to the definition, and real estate structures have to consider whether they display these characteristics.

The purpose of an investment entity is to hold several investments to diversify its risk and maximise its returns. This condition is met if a real estate entity is investing, via a holding company, into several properties or several property-holding entities. [IFRS 10 App B para B85O].

Entities might qualify as investment entities even if they have just one single investment, although the purpose for which the real estate structure has been set up must be taken into consideration.

For example, an entity might have just one single investment in the following situations: during its start-up period, when it only has seed money available; when it is in the course of finding replacements for disposals; or when it is in the process of liquidation. [IFRS 10 App B para B85P]. This can also occur where the entity is established to pool funds from a number of investors to invest in an investment unobtainable by individual investors (for example, a club deal to acquire a substantial iconic property in a core location). Typically, the investment would be out of reach for any single investor, due to its size and risk, but not for a pool of investors.

Typically, an investment entity would have several unrelated investors. However, paragraph B85R of IFRS 10 permits a single investor that represents or supports the interests of a wider group of investors (for example, a pension fund or family trust). Other examples where an investment entity might have only a single investor include the following situations, where an entity:

[IFRS 10 App B para B85S].

Other typical situations might include master-feeder structures, where there are multiple investors in the feeder funds.