Annual report 2008 - Altarea Cogedim

The instability of the capital markets has triggered a
reduction in the number of transactions in the property
market and exacerbated the difficulty of forecasting the
prices that may be secured from putting a real estate
asset up for sale. Given this period of greater-than-normal
uncertainty, appraisers have reacted by analysing carefully
the transactions that have taken place and by reviewing all
the assumptions used (discount and capitalisation rates,
rental value, vacancy, etc.) to determine the fair value of
the property assets.
7.13. Assets under development
Assets under development correspond to programmes to
develop new shopping centres and programmes to expand
or restructure existing shopping centres that are not yet
back in operation. In accordance with IAS 16, assets under
development are measured at cost.
Owing to the economic and financial crisis, the measurement
of the recoverable amount of these properties under
development at the balance sheet date entailed the use
of assumptions and estimates given the scarcity of the
properties traded, which made measurements difficult, and
the possibility of a decline in the commercial potential of
locations as a result of the possible impact of the economic
crisis on consumer spending.
On these programmes, the costs incurred, including the cost
to acquire land, are capitalised from the time the programme
begins with the prospecting phase (the period of responding
to requests for bids, prior to signing option contracts to
buy land), provided there is reasonable assurance that the
necessary administrative authorisations will be obtained.
These costs are primarily:
• design and management fees, both internal and external
to the Group,
• legal fees,
• demolition costs (if applicable),
• construction costs,
• finance costs in line with the revised IAS 23.
Costs incurred on shopping centre development transactions
for mainly investment purposes are recognised as assets under
development until the programme is completed. Where there
is a delay in the start of construction of the development or
any other evidence of impairment, management assesses on
a case-by-case basis the grounds for recognising impairment
of all or some of the costs incurred.
The internal fees are primarily programme management
fees (management of filings until permits are obtained)
and project management fees, which from an economic
standpoint are components of the cost of the asset and
are thus included in the carrying amount (in non-current
assets or inventory, as the case may be). The amount of fees
included is calculated after elimination of intercompany
profit margins.
The recoverable amount of these assets is assessed by
comparison with the cost to completion and with the
estimated value of expected future cash flows.
The transfer to investment property is made when
the shopping centre is opened (specifically, when the
Declaration of Completion and the compliance and safety
certificates, generally issued by the municipal administrative
departments, have been obtained). When a shopping centre
is delivered in stages, the opening date is determined based
on the existence of assets that can be valued individually by
an external appraiser or when more than half of the property
has entered service.
7.14. Non-current assets held for sale
and discontinued operations
In accordance with IFRS 5, a non-current asset is classified
as “held for sale” if its carrying amount is to be recovered
primarily through a sale transaction rather than through
ongoing use.
This is the case if the asset is available for immediate sale
in its current state, subject only to the usual and customary
conditions for the sale of such an asset, and if its sale is
highly probable.
Indications of a high probability of sale include the existence
of a plan by the Group’s management to sell the asset and
an active programme to find a buyer and close a sale within
the next 12 months.
The part of this standard relating to measurement rules
applies only to assets not measured using the fair value
method for investment properties. On the other hand, all
assets, including assets where a sale is highly probable, are
classified on the balance sheet as assets held for sale.
There are no discontinued activities to be noted in the
financial year for the Group.
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