Stockland Direct Retail Trust No.1

Stockland Direct Retail Trust No. 1 and its controlled entities
Notes to the Consolidated Financial Statements
For the Year Ended 30 June 2009
1 Summary of significant
accounting policies
Stockland Direct Retail Trust No. 1 (“the Trust”)
is a Managed Investment Scheme domiciled in
Australia. The consolidated Financial Report
as at and for the financial year ended 30 June
2009 comprises of the Financial Report of the
Trust and its controlled entities (“the
consolidated entity”).
The Financial Report as at and for the financial
year ended 30 June 2009 was authorised for
issue by the Directors of the Responsible
Entity on 20 August 2009.
(a) Statement of compliance
The Financial Report is a general purpose
financial report which has been prepared in
accordance with Australian Accounting
Standards (“AASBs”) (including Australian
Interpretations) adopted by the Australian
Accounting Standards Board (“AASB”) and the
Corporations Act 2001. The Financial Report
of the consolidated entity and the Trust comply
with the International Financial Reporting
Standards (“IFRSs”) and interpretations
adopted by the International Accounting
Standards Board (“IASB”).
(b) Basis of preparation
The Financial Report has been prepared on
the basis of the going concern and historical
cost conventions except for derivative financial
instruments and investment properties which
are stated at their fair value.
As at 30 June 2009, the consolidated entity
has a net current asset deficiency of
$55,028,000, which is mainly due to the
current classification of the Trust’s loan facility,
due to expire on 22 December 2009. The
ability of the consolidated entity to continue as
a going concern and meet its debts and
commitments as they fall due is dependent
upon the Trust being successful in refinancing
the loan facility and the Trust being in
compliance with future loan covenants which
may require the sale of one or more of the
consolidated entity’s properties to reduce the
outstanding loan facility.
The Directors are not aware of any
circumstances that may lead to the Trust not
obtaining refinancing of the loan facility prior to
the expiry to the existing loan facility. On the
date of this report, being 20 August 2009,
based on information known at that date, the
Directors have formed the view that the
Financial Report for the year ended 30 June
2009, can be prepared on a going concern
basis as they believe reasonable grounds exist
to expect the loan facility will be refinanced.
The Directors believe that while this is a
material uncertainty, it does not cast doubt on
the consolidated entity’s ability to continue as
a going concern.
This view was formed by taking into account
a number of factors including the financial
position of the consolidated entity as at
30 June 2009 and information known at the
date of this report, and includes the following:
• As at 30 June 2009, the consolidated
entity’s total assets equal $81,102,000.
This value is 1.4 times the amount of drawn
debt of $56,149,000; and
• The Trust can demonstrate that it can
service the interest payments on the
existing loan facility. In addition, the Trust
will be able to fund an increase in margin
on the loan facility.
Further information in relation to the loan
facility can be found in Note 14 to the Financial
Report.
The Trust is an entity of the kind referred to in
ASIC Class Order 98/100 (as amended) and in
accordance with that Class Order, amounts in
the Financial Report have been rounded to the
nearest thousand dollars, unless otherwise
stated.
The preparation of Financial Statements
requires management to make judgements,
estimates and assumptions that affect the
application of accounting policies and
reported amounts of assets, liabilities, income
and expenses. Actual results may differ from
these estimates. Estimates and underlying
assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are
recognised in the period in which the estimate
is revised and in any future periods affected.
Refer to Note 2 for significant areas of
estimation.
The accounting policies have been applied
consistently throughout the consolidated entity
for the purposes of this Financial Report.
The significant policies which have been
adopted in the preparation of this Financial
Report are:
(c) Revenue recognition
Revenue is recognised at the fair value of the
consideration received or receivable net of the
amount of goods and services tax (“GST”)
levied.
Revenue is recognised for the major business
activities as follows:
Rent from investment properties
Rent from investment properties is recognised
in the Income Statement on a straight-line
basis over the lease term. Rent not received at
balance date is reflected in the Balance Sheet
as a receivable or if paid in advance, as rents
in advance. Lease incentives granted are
recognised over the lease term, on a straightline
basis, as a reduction of rent.
Interest income
Interest income is recognised in the Income
Statement as it accrues using the effective
interest method and if not received at balance
date, is reflected in the Balance Sheet as a
receivable.
Distributions
Revenue from distributions from controlled
entities are recognised in the Income
Statement on the date the Trust’s right to
receive payment is established, being the date
when they are declared by those entities.
(d) Segment reporting
A segment is a distinguishable component of
the consolidated entity that is engaged either
in providing related products or services
(business segment), or in providing products
or services within a particular economic
environment (geographical segment), which is
subject to risks and rewards that are different
from those of other segments.
(e) Goods and services tax
Revenues, expenses and assets are
recognised net of the amount of GST except
where the amount of GST incurred is not
recoverable from the relevant taxation
authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated with the
amount of GST included. The net amount of
GST recoverable from, or payable to, the
relevant taxation authority is included as a
current asset or liability in the Balance Sheet.
Cash flows are included in the Cash Flow
Statement on a gross basis. The GST
components of cash flows arising from
investing and financing activities which are
recoverable from, or payable to, the taxation
authority are classified as operating cash
flows.
(f) Income tax
Under current Australian income tax
legislation, the Trust and the consolidated
entity are not liable for income tax, provided
that the taxable income (including any
assessable component of any capital gains
from the sale of investment assets) is fully
distributed to Unitholders each year. Tax
allowances for building, plant and equipment
depreciation are distributed to Unitholders in
the form of tax deferred components of
distributions.
Stockland Direct Retail Trust No. 1 June 2009 9