Real Estate Investment Funds: Financial reporting - Alfi

table of contents
chapter I - PROPERTY VALUATION 5
1. What are acceptable valuation methods for investment property? 6
2. What are the generally accepted frameworks for determining fair value
for investment properties? 6
3. What is understood by the term "Fair Value" for investment property and
is this always the same as "Market Value" as described in various property
valuation standards? 6
4. Who can be appointed as an independent valuer to a Luxembourg REIF? 7
5. What is an acceptable property valuation frequency? 7
6. What is the best way of reconciling multiple conflicting valuations? 8
7. How should a fund treat transactions where the purchase or sale price
varies from the independent valuation? 8
8. How should a fund treat property portfolio premiums? 8
chapter II - VALUATION UNCERTAINTY 9
1. What is valuation uncertainty? 10
2. What actions regarding financial reporting should be taken by the management
of the fund relating to the increased uncertainty in the valuation of real estate? 10
3. How recent should a valuation be to be relevant in current market conditions? 11
4. What other considerations should management take into account in volatile
market conditions? 11
5. How may this impact the audit of financial statements of Luxembourg
real estate funds? 11
6. What actions should be taken by the Central Administration/Custodian? 12
chapter III - ACCOUNTING 13
1. Which GAAPs are appropriate for the financial statements of
a Luxembourg REIF? 14
2. How should a fund treat development property not characterised as inventory? 14
3. How should a fund treat properties held for trading purposes? 14
4. Is there a requirement to carry debt at fair value? 15
5. How is revenue recognised in a real estate fund? 15
6. What is the accounting treatment for property acquisition costs? 16
7. What is the recommended treatment of fund formation costs? 16
8. What is the method of accounting for performance fees/carried interest? 16
9. What are the typical accounting treatments for dividends? 17
10. How do funds treat currency or interest rate hedges? 18
11. How do Luxembourg REIFs treat deferred tax liabilities? 18
12. How do funds treat goodwill arising on acquisition of property owning vehicles? 19
13. What levels of leverage/gearing are allowed in Luxembourg REIFs? 19
chapter IV - NET ASSET VALUE CALCULATION 21
1. Does the net equity or net assets attributable to unit holders/
shareholders in the financial statements always correspond to
the Fund NAV and unit/share pricing? 22
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