Annual Report 2006 - Tamar European Industrial Fund
Annual Report 2006 - Tamar European Industrial Fund
Annual Report 2006 - Tamar European Industrial Fund
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Notes to the Accounts<br />
1. Accounting policies<br />
A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set<br />
out below.<br />
(a) Basis of Accounting<br />
The consolidated accounts have been prepared in accordance with International Financial <strong>Report</strong>ing Standards issued<br />
by, or adopted by, the International Accounting Standards Board (the ‘‘IASB’’), interpretations issued by the International<br />
Financial <strong>Report</strong>ing Interpretations Committee, applicable legal and regulatory requirements of Guernsey Law and the<br />
Listing Rules of the UK Listing Authority. The Company considers that it has complied (and intends to continue to comply)<br />
with the conditions applicable to property investment companies set out in paragraph 15.5.15R of the Listing Rules of the<br />
United Kingdom Listing Authority.<br />
No International Financial <strong>Report</strong>ing Standards have been adopted early, however it is likely that any Standards issued, but<br />
that are not yet effective, would only require changes in disclosure and not result in changes to the accounting policies for<br />
recognition and measurement.<br />
(b) Basis of Consolidation<br />
The consolidated accounts comprise the accounts of the Company and all of its subsidiaries, being entities controlled by<br />
the Company, drawn up to 31 December each year.<br />
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from<br />
the date on which control is transferred out of the Group.<br />
These consolidated financial statements are presented in sterling, which is the Company’s functional currency. All financial<br />
information presented in sterling has been rounded to the nearest thousand.<br />
(c) Revenue Recognition<br />
Rental income, excluding VAT, arising on investment properties is accounted for in the Income Statement on a straight-line<br />
basis over the lease term of ongoing leases. Lease incentives granted are recognised as an integral part of the total rental<br />
income.<br />
Interest income is accounted for on an accruals basis.<br />
(d) Expenses<br />
Expenses are accounted for on an accruals basis. The Group’s investment management and administration fees, finance<br />
costs and all other expenses are charged through the Income Statement.<br />
(e) Taxation<br />
Deferred income tax is provided, using the liability method, on temporary differences at the balance sheet date between<br />
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax<br />
liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax<br />
rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.<br />
As required by IAS 12, deferred income tax is not recognised on temporary differences at the time of initial recognition<br />
arising from transactions treated as asset acquisitions. The aggregate amount of such deferred income tax is disclosed as<br />
unrecognised deferred income tax.<br />
Deferred income tax assets are only recognised if it is considered more likely than not that there will be suitable profits from<br />
which the future reversal of the underlying timing differences can be deducted.<br />
(f) Investment Properties<br />
Freehold investment properties, or the equivalent, are initially recognised at cost, being the fair value of consideration<br />
given, including transaction costs associated.<br />
Leasehold investment properties, or the equivalent, are initially recognised at the lower of fair value and the present value<br />
of minimum lease payments.<br />
After initial recognition, investment properties are measured at fair value, with unrealised gains and losses recognised in<br />
the Income Statement. Fair value is based on the open market valuation provided by Savills SA, chartered surveyors, at the<br />
balance sheet date.<br />
On derecognition, realised gains and losses on disposals of investment properties are recognised in the Income Statement.<br />
Recognition and derecognition occurs on the exchange of signed contracts between a willing buyer and a willing seller.<br />
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Notes to the Accounts<br />
1. Accounting policies (continued)<br />
(f) Investment Properties (continued)<br />
In the case of development expenditure, cost includes the cost of materials and direct labour and any other costs directly<br />
attributable to bringing the asset to a working condition for its intended use. Cost also includes capitalised borrowing costs<br />
up to the point of practical completion.<br />
(g) Derivative Financial Instruments<br />
The Group holds derivative financial instruments to hedge its interest rate exposures. Derivatives are recognised initially<br />
at fair value; attributable transaction costs are recognised in the Income Statement when incurred. Subsequent to initial<br />
recognition, derivatives are measured at fair value. Hedge accounting is not applied to derivative instruments and changes<br />
in fair value are recognised in the Income Statement.<br />
(h) Share Issue Expenses<br />
Incremental external costs directly attributable to the equity transaction that would have otherwise not been incurred are<br />
written off against the Share Premium Account.<br />
All other expenses relating to the launch of the Company not directly attributable to the issue of equity are expensed<br />
through the Income Statement.<br />
(i) Segmental <strong>Report</strong>ing<br />
The Directors are of the opinion that the Group is engaged in a single segment of business being property investment<br />
business, in one geographical area, Europe (excluding the United Kingdom).<br />
(j) Cash and Cash Equivalents<br />
Cash at bank and short term deposits that are held to maturity are carried at amortised cost. Cash and cash equivalents<br />
consist of cash in hand and short term deposits in banks with an original maturity of three months or less.<br />
(k) Trade and Other Receivables<br />
Trade receivables, which are generally due for settlement at the relevant quarter end are recognised and carried at the<br />
original invoice amount. As impairment events are identified, provisions are made on either a specific or collective basis,<br />
as may be applicable.<br />
(l) Interest-Bearing Borrowings<br />
All non-current borrowings are initially recognised at cost, being fair value of the consideration received, net of arrangement<br />
costs associated with the borrowing. After initial recognition, all interest bearing borrowings are subsequently measured<br />
at amortised cost using the effective yield method. The effective yield method recognises interest in the Income Statement<br />
in the period to which it relates. Amortised cost is calculated by taking into account any loan arrangement costs and any<br />
discount or premium on settlement.<br />
(m) Foreign Exchange<br />
1. Foreign currency transactions<br />
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates<br />
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are<br />
retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary<br />
items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for<br />
effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange<br />
rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at<br />
fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined. Foreign<br />
currency differences arising on retranslation are recognised in profit or loss.<br />
2. Foreign operations<br />
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are<br />
translated to sterling at exchange rates at the reporting date. The income and expenses of foreign operations are translated<br />
to sterling at exchange rates at the dates of the transactions.<br />
Foreign currency differences are recognised directly in equity. When a foreign operation is disposed of, in part or in full, the<br />
relevant amount in equity is transferred to the Income Statement.<br />
(n) Use of Estimates and Judgements<br />
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect<br />
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results<br />
may differ from these estimates.<br />
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