Annual report 2010 - plazacenters

Financial statements
Notes to the consolidated financial statements
continued
Note 41 – Critical accounting judgments and key sources
of estimation uncertainty continued
Significant estimates
Significant estimated (on the basis of weighted averages) used in the valuations as of December 31, 2010 are presented below:
Retail
Offices
2010 2009 2010 2009
Estimated rental value per m 2 per month (in EUR)*
Romania 10-24 10-22 12-19 12.5
Czech Republic 10-15 13-15 13 13
Serbia 16-36 16-36 17 17
Latvia 15.8 17.4 N/A N/A
Poland 12-18 14-18 11.75 11.75
Greece 30 30 N/A N/A
Hungary 10-22 10-24 11.5 11.5
Bulgaria 16.5-21 12-22 11.67 12
Average risk adjusted yield used in capitalization
Romania 7.00%-9.70% 7.00%-9.70% 7.00%-9.65% 9.65%
Czech Republic 7. 25%-8.00% 7.50%-8.25% 7.50% 7.50%
Serbia 9.25%-10.50% 9.25%-10.50% 9.25% 9.25%
Latvia 8.75% 9.25% N/A N/A
Poland 7.75%-8.25% 7.75%-8.50% 7.75% 7.75%
Greece 7.75% 7.25% N/A N/A
Hungary 8.00%-9.00% 8.75%-9.00% 8.50% 8.75%
Bulgaria 9.00%-9.75% 8.50%-9.25% 8.5% 8.5%
Estimated rental value per m 2 per month (in USD)*
India 17-29 15-26 9-18 15.4
Average risk adjusted yield used in capitalizing the net
India 9%-13% 10%-12% 11%-12% 12%
* Rental value per m 2 spread due to various geographic locations in the countries (e.g provincial area comparing capital cities).
b. Potential penalties, guarantees issued
Penalties are part of the ongoing construction activities, and result from obligations the Group takes on towards third parties, such
as banks and municipalities. The Company’s management is required to provide estimations about risks evolving from potential
guarantees given by the Company or penalties that the Company might have to pay.
c. Expired building permits
The process of construction is long, and subject to authorization from local authorities. It may occur that building permits will expire
and will cause the Company additional preparations and costs, and can cause construction to be delayed or abandoned.
d. Valuation of share-based payments arrangements
The Company measures the fair value of share-based payments using a valuation technique. The valuation is relying on assumptions
and estimations of key parameters such as volatility, which are changing, as market conditions change. The risk is that the estimated
costs related to share-based payments might not be correct eventually.
e. Classification of investment property
The Company is classifying its assets purchased as part of business combination in the US as investment property, as it estimates it
benefits from up lift of prices in the US and it will be able to dispose of these assets within four to five years with significant gain, and
without any need for significant capital expenditure spent. Shopping centers which were constructed by the Company in Eastern
Europe and are open to the public (four shopping centers as of December 31, 2010) are classified as trading property, as the
Company holds them temporarily, and is making continuous efforts to prepare the assets to be ready for sale and dispose of them.
The Company is regarding the rental income from the shopping centers as incidental to the selling price of the shopping centers.
f. Effective control over EDT
According to the Company management judgment, the rights specified in EDT’s responsible entity constitution mention in note 37
do not give EDT’s minority rights to participate in operating and financial decisions of EDT and its ordinary course of business, and
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Plaza Centers N.V. Annual report 2010