Annual Report 2007 - The Link REIT

88 The Link Real Estate Investment Trust Annual Report 2007
Notes to the Consolidated Financial Statements
3 Summary of significant accounting policies (continued)
(e)
(f)
Accounts and other receivables
Accounts and other receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method, less provision for impairment. A provision for impairment of accounts and other
receivables is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. The amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cashflows, discounted at the effective interest rate. The
amount of the provision is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less and bank overdrafts.
(g) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired business at the date of acquisition. Goodwill on business combinations is stated as a
separate asset. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for
the purpose of impairment testing.
The excess of the cost over the fair value of net assets acquired by the Group arises as a result of the recognition of
deferred taxation based on the difference between the tax cost base and the fair value of net assets acquired.
(h) Unitholders’ funds as a financial liability
In accordance with the Trust Deed, The Link REIT is required to distribute to unitholders not less than 90% of the
Group’s Distributable Income for eachfinancial year. The Trust also has a limited life of 80 years from the date of
establishment. Accordingly, the units contain contractual obligations of the Trust to pay to its unitholders cash
dividends and also upon termination of the Trust, a share of all net cash proceeds derived from the sale or realisation
of the assets of the Trust less any liabilities, in accordance with their proportionate interests in the Trust at the date of
the termination. The unitholders' funds are therefore classified as afinancial liability rather than equity in accordance
with HKAS 32: Financial Instruments: Disclosure and Presentation. It is shown on the balance sheet as the net assets
attributable to unitholders. Distributions to unitholders are recognised in the income statement as part of finance
costs.