LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Appendix BLeased assets—Leases in terms of which the entity assumes substantially all the risks and rewards of ownership areclassified as finance leases. The owner-occupied property acquired by way of finance lease is stated at anamount equal to the lower of its fair value and the present value of the minimum lease payments atinception of the lease, less accumulated depreciation and impairment losses. A property held under afinance lease and leased out under operating lease is classified as investment property and stated at thefair value. Lease payments are accounted for as described in these accounting policies. Property heldunder operating leases that would otherwise meet the definition of investment property is classified asinvestment property.Liabilities and equity financial instruments—A financial instrument is classified as a liability or as equity in accordance with the substance of thecontractual arrangement on initial recognition. Where the financial instrument does not give rise to acontractual obligation on the part of the issuer to make payment in cash or kind under conditions that arepotentially unfavourable, it is classified as an equity instrument. The equity and the liability elements ofcompound instruments are classified separately as equity and as a liability. Equity instruments arerecorded at the proceeds, net of direct issue costs.Fair value of financial instruments—The carrying values of current financial assets and financial liabilities including cash, accounts receivable,short-term borrowings, accounts payable approximate their fair values due to the short-term maturity ofthese instruments. The fair values of non-current financial instruments are not disclosed unless there aresignificant items at the end of the year and in the event the fair values are disclosed in the relevant notes.Disclosures of fair value are not made when the carrying amount is a reasonable approximation of fairvalue. The maximum exposure to credit risk is the fair value of the financial instruments at the balancesheet date.Cash flow hedge—Where a derivative financial instrument is designated as a hedge of the variability in cash flows of arecognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or losson re-measurement of the derivative financial instrument to fair value is recognised directly in hedgingreserve. The ineffective part of any gain or loss is recognised immediately in the statement of total return.When the forecast transaction subsequently results in the recognition of a non-financial asset or nonfinancialliability, or the forecast transaction for a non-financial asset or non-financial liability becomes afirm commitment for which fair value hedge accounting is applied, the associated cumulative gain or loss isremoved from hedging reserve and included in the initial cost or other carrying amount of the non-financialasset or liability. If a hedge of a forecast transaction subsequently results in the recognition of a financialasset or financial liability, the associated gains and losses that were recognised directly in hedging reserveare reclassified into the statement of total return in the same period or periods during which the assetacquired or liability assumed affects the statement of total return (i.e. when interest income or expense isrecognised). For other cash flow hedges, the associated cumulative gain or loss is removed from hedgingreserve and recognised in the statement of total return in the same period or periods during which thehedged forecast transaction affects the statement of total return.When a hedging instrument expires or is sold, terminated or exercised, or the designation of the hedgerelationship is revoked but the hedged forecast transaction is still expected to occur, the cumulative gain orloss at that point remains in hedging reserve and is recognised in accordance with the above policy whenthe transaction occurs. If the hedged forecast transaction is no longer expected to take place, thecumulative unrealised gain or loss recognised in hedging reserve is recognised immediately in thestatement of total return.Foreign currency transactions—The functional currency is the Singapore dollar as it reflects the primary economic environment in whichthe Trust operates. Transactions in foreign currencies are recorded in the functional currency at the ratesruling at the dates of the transactions. At each balance sheet date, recorded monetary balances andbalances measured at fair value that are denominated in foreign currencies are reported at the rates rulingB-13