• mixed-used projects such as Überseequartier and Gaîté Montparnasse.
Assets still stated at cost were subject to impairment tests as at December 31, 2017. Allowances were booked for a
total amount of €23.7 Mn.
Total
investment
properties at
(€Mn)
Gross value
Impairment
cost
12/31/2016 1,025.4
(71.5)
954.0
Acquisitions(1) 155.1
–
155.1
Capitalised expenses(2) 282.7
–
282.7
Disposals/exits from the scope of consolidation
(1.6)
–
(1.6)
Reclassification and transfer of category
(28.6)
4.3
(24.3)
Discounting impact
0.5
–
0.5
Impairment/reversal –
(23.7)
(23.7)
Currency translation
0.1
–
0.1
12/31/2017 1,433.6
(90.9)
1,342.8
(1) Mostly relates to acquisitions for Überseequartier project.
(2) Includes mainly the capital expenditures related to investments in the Mall of The Netherlands extension and renovation project and to the Trinity and Überseequartier new development projects.
Investment
property
1415
12.1.2
Level of aggregation for IFRS 13 disclosures
IFRS 13 disclosures are required for each class of assets (and liabilities). These classes
are determined based on:
• the nature, characteristics and risks of the asset or liability; and
• the level of the fair value hierarchy within which the fair value measurement is
categorised. [IFRS 13.94].
The determination of the appropriate class of assets will require significant judgement.
See Chapter 14 at 20.1.2 for further discussion on this determination.
At one end of the spectrum, the properties in an operating segment (as defined by
IFRS 8 – Operating Segments) may be a class of assets for the purpose of the
disclosures required by IFRS 13. This may be the case if the properties have the
same risk profile (for example, the segment comprises residential properties in
countries with property markets of similar characteristics) even if there are a large
number of properties in the segment.
At the other end of the spectrum, IFRS 13 disclosures may be required for individual
properties or small groups of properties if the individual properties or groups of
properties have different risk profiles (for example, a real estate entity with two
properties – an office building in a developed country and a shopping centre in a
developing country).
The number of classes may need to be greater for fair value measurements categorised
within Level 3 of the fair value hierarchy because those measurements have a greater
degree of uncertainty and subjectivity.
A class of assets and liabilities will often require greater disaggregation than the line
items presented in the statement of financial position. However, sufficient information
must be provided to permit reconciliation to the line items presented in the statement
of financial position.
When determining the appropriate classes, entities should also consider all of the following:
• the level of detail necessary to satisfy the disclosure requirements;
• how much emphasis to place on each of the various requirements;
• how much aggregation or disaggregation to undertake; and
• whether users of financial statements need additional information to evaluate the
quantitative information disclosed. [IFRS 13.92].
Determining appropriate classes of assets and liabilities for which disclosures about fair
value measurements should be provided requires considerable judgement. [IFRS 13.94].
12.1.3
Disclosure of direct operating expenses
As set out in 12.1 above, entities are required to disclose both the direct operating
expenses arising from investment property that generated rental income during the
period and the amounts arising from investment property that did not generate rental
income during the period.
1416 Chapter 19
In practice, this requirement can be interpreted in different ways and the outcome will
depend upon a number of judgements, for example, the unit of account for the
investment property. In the instance of a multi-tenanted property, the relevant unit may
be considered either the entire building or a separately let floor.
It will therefore be necessary for an entity to interpret this requirement and apply that
interpretation, as an accounting policy and judgement, consistently.
12.2 Additional disclosures for the fair value model
A reconciliation between the carrying amounts of investment property at the start and
end of the period must be given showing the following:
• additions, disclosing separately those additions resulting from acquisitions and
those resulting from subsequent expenditure recognised in the carrying amount of
an asset;
• additions resulting from acquisitions through business combinations;
• assets classified as held for sale or included in a disposal group classified as held
for sale in accordance with IFRS 5 and other disposals;
• net gains or losses from fair value adjustments;
• the net exchange differences arising on the translation of the financial statements
into a different presentation currency, and on translation of a foreign operation
into the presentation currency of the reporting entity;
• transfers to and from inventories and owner-occupied property; and
• other changes. [IAS 40.76].
When a valuation obtained for investment property is adjusted significantly for the
purpose of the financial statements, for example to avoid double-counting of assets or
liabilities that are recognised separately (see 6.1.4 above), the entity must disclose a
reconciliation between the valuation obtained and the adjusted valuation included in
the financial statements, showing separately the aggregate amount of any recognised
lease liabilities (or lease obligations, if IFRS 16 is not yet adopted) that have been added
back, and any other significant adjustments. [IAS 40.77]. Extracts 19.5 and 19.6 above
provide examples of such disclosure.
12.2.1
Presentation of changes in fair value
Neither IAS 1 nor IAS 40 specifies how changes in the fair value of investment property
should be presented. The Extracts below show two different approaches. In
Extract 19.14 below the change in fair value (here referred to as a ‘Gain on revaluation’)
is presented together with the profit or loss on disposal of properties with an analysis of
the components included in the notes to the accounts. By contrast, in Extract 19.15
below, the change in fair value is analysed and presented separately from the profit or
loss on disposal of properties.
Investment
property
1417
Extract 19.14: Capital & Counties Properties PLC (2017)
Consolidated income statement [e
xtract]
For the year ended 31 December 2017
Re-presented
2017
2016
Note
£m
£m
Continuing operations
Revenue
2
87.7
94.1
Rental income
80.0
70.7
Rental expenses
(13.1)
(12.3)
Net rental income
2
66.9
58.4
Profit on sale of trading property
3
0.9
5.6
Other income
3.8
4.6
Loss on revaluation and sale of investment and development property
4
(90.9)
(231.2)
Profit on sale of available-for-sale investments
–
0.4
Impairment of other receivables
5
(1.3)
(14.8)
Other costs
6
–
(5.0)
(20.6)
(182.0)
Administration expenses
(38.8)
(42.0)
Operating loss
(212.8)
(224.0)
Extract 19.15: Unibail-Rodamco SE (2017)
5.1.
CONSOLIDATED FINANCIAL STATEMENTS [extract]
5.1.1.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME [extract]
(€Mn)
Notes 2017 2016
Net rental income
1,582.6 1,528.5
Corporate expenses
(117.3)
(116.8)
Development expenses
(3.6)
(5.9)
Depreciation of other tangible assets
(2.2)
(2.2)
Administrative expenses
4.3.4
(123.1)
(124.9)
Acquisition and related costs
4.3.5
(62.4)
(1.3)
Revenues from other activities
256.1
261.3
Other expenses
(176.3)
(175.1)
Net other income
4.3.3
79.8
86.2
Proceeds from disposal of investment properties
592.5
973.9
Carrying value of investment properties sold
(518.7)
(882.7)
Result on disposal of investment properties
5.6
73.8
91.2
Proceeds from disposal of shares
27.3
25.9
Carrying value of disposed shares
(27.3)
(20.9)
Result on disposal of shares
3.3.2
0.0
5.0
Valuation gains on assets
1,770.0
2,244.0
Valuation losses on assets
(405.6)
(238.2)
Valuation movements on assets 5.5
1,364.4
2,005.8
Impairment of goodwill/Negative goodwill
5.4
(9.2)
–
NET OPERATING RESULT BEFORE FINANCING COST
2,906.0 3,590.5
1418 Chapter 19
Some companies include the change in fair value within their definition of
operating profit. This approach appears to be just one of the available accounting policy
choices but it is worth noting that at least one European regulator has concluded that
fair value changes arising from investment property must be taken into account when
determining operating results. This decision was reported in the European Securities
and Markets Authority’s (‘ESMA’) Report – 11th Extract from the EECS’s Database of
Enforcement (ESMA/2011/265).
The regulator’s rationale for this decision was that fair value changes in investment
property are a normal part of the activities of a real estate company and feature in the
description of the business model of that real estate business.24
12.2.2
Extra disclosures where fair value cannot be determined reliably
If an entity chooses the fair value model, but in an exceptional case cannot measure the
fair value of the property reliably and accounts for the property under the cost model in
IAS 16 or in accordance with IFRS 16, the reconciliation described in 12.2 above should
disclose the amounts for such investment property separately from amounts relating to
other investment property. In addition to this, the following should be disclosed:
• a description of the investment property;
• an explanation of why fair value cannot be measured reliably;
• if possible, the range of estimates within which fair value is highly likely to lie; and
• on disposal of investment property not carried at fair value:
• the fact that the entity has disposed of investment property not carried at
fair value;
• the carrying amount of that investment property at the time of sale; and
• the amount of gain or loss recognised. [IAS 40.78].
The standard makes it clear that this situation, at least for completed investment
property, would be exceptional (see 6.2 above). The situation for investment property
under construction is discussed at 6.3 above.
12.3 Additional disclosures for the cost model
If investment property is measured using the cost model, the following disclosures are
required by IAS 40 in addition to those at 12.1 above:
• the depreciation methods used;
• the useful lives or the depreciation rates used;
• the gross carrying amount and the accumulated depreciation (aggregated with
accumulated impairment losses) at the beginning and end of the period;
• a reconciliation of the carrying amount of investment property at the beginning
and end of the period, showing the following:
• additions, disclosing separately those additions resulting from acquisitions
and those resulting from subsequent expenditure recognised as an asset;
Investment
property
1419
• additions resulting from acquisitions through business combinations;
• assets classified as held for sale or included in a disposal group classified as
held for sale in accordance with IFRS 5 and other disposals;
• depreciation;
• the amount of impairment losses recognised, and the amount of impairment
losses reversed, during the period in accordance with IAS 36 (see
Chapter 20);
• the net exchange differences arising on the translation of the financial
statements into a different presentation currency, and on translation of a
foreign operation into the presentation currency of the reporting entity;
• transfers to and from inventories and owner-occupied property; and
• other changes;
• the fair value of investment property. In the exceptional cases when an entity
cannot measure the fair value of the investment property reliably (see 6.2 above),
it shall disclose:
• a description of the investment property;
• an explanation of why fair value cannot be measured reliably; and
• if possible, the range of estimates within which fair value is highly
likely to lie.
[IAS 40.79].
12.4 Presentation of sales proceeds
IAS 16 allows an entity that, in the course of its ordinary activities, routinely sells items
of property, plant and equipment that it has held for rental to transfer such assets to
inventories at their carrying amount when they cease to be rented and become held for
sale. The proceeds from the sale of such assets are then recognised as revenue (see
Chapter 18 at 7.2).
However, investment property, by definition, is held to earn rentals or for capital
appreciation rather than for sale in the ordinary course of business. Consequently,
we consider that this IAS 16 accounting treatment may not be applied by analogy
to IAS 40 and proceeds from the sale of investment property may not be presented
as revenue.
Despite this, however, it may be appropriate to present separately the material gains
or losses on retirement or disposal of investment property elsewhere in the financial
statements, either as part of the income statement or in the notes. [IAS 1.97]. For
example, Unibail-Rodamco has chosen to present proceeds from disposal of
investment properties, together with the carrying amount derecognised and the net
gain/loss on disposal on the face of its statement of comprehensive income (see
Extract 19.15 above).
1420 Chapter 19
13 FUTURE
DEVELOPMENTS
13.1 New standard for insurance contracts: IFRS 17
In May 2017, the IASB issued IFRS 17. Once effective, IFRS 17 will replace IFRS 4 –
Insurance Contracts.
As part of the consequential amendments arising from IFRS 17, the subsequent
measurement requirements in IAS 40 will be amended and this is indicated in 5.2 above.
IFRS 17 and its consequential amendments to other standards are effective for annual
periods beginning on or after 1 January 2021, with adjusted comparative figures
required. Early application is permitted provided that both IFRS 9 and IFRS 15 have
already been applied, or are applied for the first time, at the date on which IFRS 17 is
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 279
