Real Estate Investment Funds: Financial reporting - Alfi
Real Estate Investment Funds: Financial reporting - Alfi
Real Estate Investment Funds: Financial reporting - Alfi
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3. What are the typical<br />
contents of the related<br />
party disclosure note?<br />
a. Transactions with related parties need to be<br />
disclosed in the notes to the financial<br />
statements to enable readers to understand the<br />
nature of these transactions and to determine<br />
if they have been conducted on normal<br />
market terms or in line with the provisions of<br />
the Fund Documents. Related parties of a real<br />
estate fund are typically the promoter, asset<br />
managers, joint venture partners, key service<br />
providers such as custodians, officers and<br />
management etc.<br />
b. Typical related party transactions are:<br />
Q Q Performance fees (if any)<br />
Management fee/Asset management fees<br />
Administrative fees (if self-administered)<br />
Distributors fees<br />
Acquisitions from related parties<br />
Loans to or from the asset management<br />
company or promoter<br />
Co-investment of the promoter in the fund<br />
4. What are the<br />
requirements for risk<br />
disclosures?<br />
a. Risk disclosures are common both in the<br />
prospectuses of funds and are a requirement<br />
under IFRS in the financial statements.<br />
b. Common financial risk disclosures for a real<br />
estate fund include:<br />
QQ<br />
Diversification risks<br />
QQ<br />
<strong>Financial</strong> leverage risk<br />
QQ<br />
Credit risk<br />
QQ<br />
Liquidity risks<br />
QQ<br />
Currency risks<br />
c. Pursuant to adoption of IFRS 7 and amended<br />
IAS 1, in addition to the above, <strong>Funds</strong><br />
preparing IFRS financial statements are<br />
required to provide quantitative analysis of<br />
liquidity, credit and market risks (including<br />
sensitivity analysis) as well as capital<br />
management disclosures.<br />
d. In addition, it is common practice and a<br />
requirement of IFRS and LuxGAAP to<br />
disclose the nature of key estimates made in<br />
establishing the NAV of a fund. These<br />
estimates of risks include:<br />
Property valuations<br />
Fair value of financial instruments<br />
Bad debt provisions<br />
Accounting for acquisitions<br />
Estimation of current and deferred tax provisions<br />
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