Annual Report 2007 - The Link REIT

Annual Report 2007
The Link Real Estate Investment Trust
89
Notes to the Consolidated Financial Statements
3 Summary of significant accounting policies (continued)
(i)
Accounts payable and provisions
(i)
(ii)
Accounts payable
Accounts payable is recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the
amount can be made. Where a provision is expected to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
(j)
(k)
Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are
accounted for as operating leases. Details of recognition of operating lease rental income are set out in note 3(n) (i)
below.
Deferred taxation
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidatedfinancial statements. Deferred taxation
is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associates, except
where the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the
temporary differences will not reverse in the foreseeable future.
(l)
Interest bearing liabilities
Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Interest bearing
liabilities are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the income statement over the period of the interest bearing liabilities
using the effective interest method.