Real Estate Investment Funds: Financial reporting - Alfi

accounting
c. There is no detailed definition of how or
when to calculate the leverage ratio in CSSF
guidelines. However, it is normal practice to
calculate the ratio on a spot basis each time
an official Fund NAV is reported. The basis
of the calculation should be detailed in the
Fund Documentation.
d. It is the responsibility of the Fund’s
Management to calculate and monitor the
ratio. Custodians, central administrators and
auditors, in the normal course of their work,
verify that this control is effective and that
the calculation has been correctly made in
line with the Fund Documentation.
e. External debt comprises the overall borrowings
of the fund, excluding working capital credit
balances such as creditors and accruals. This
would normally mean that overdrafts which
are used to finance the ongoing operations of
the fund would be included, along with
mortgage debt, subscription lines, revolving
credit facilities etc., but does not include
shareholder loans, other shareholder debt
instruments or inter-company debt inside the
REIFs holding structure.
f. Monitoring of compliance with the obligations
of these various borrowing facilities is primarily
the responsibility of the Fund’s Management.
Custodians may also consider the effectiveness
of this control in so far as it is an encumbrance
on the assets of the fund which they have a
responsibility to supervise on behalf of investors.
Auditors also consider this element in their
review for potential contingencies, and in their
audit of the presentation of borrowings in the
balance sheet.
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