Annual Report 2011 - Dundee International REIT

DUNDEE INTERNATIONAL 2011 Annual Report
The Trust considers interest expense on the Exchangeable Notes to be a financial activity in the statement of
cash flows.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.
Financial derivatives
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.
Derivative instruments are recorded in the consolidated balance sheet at fair value. Changes in fair value of
derivative instruments that are not designated as hedges for accounting purposes are recognized in fair value
adjustments to financial instruments in the statement of comprehensive income.
The Trust has not designated any derivatives as hedges for accounting purposes.
Interest
Interest on debt includes coupon interest on term loans, amortization of premiums allocated to the conversion
features of the convertible debentures, amortization of ancillary costs incurred in connection with the
arrangement of borrowings and interest on Exchangeable Notes. Finance costs are amortized to interest
expense unless they relate to a qualifying asset.
Equity
The Trust classifies the Units as equity. Under IAS 32 the Units are considered a puttable financial instrument
because of the holder’s option to redeem Units, generally at any time, subject to certain restrictions, at a
redemption price per unit equal to the lesser of 90% of a 20-day weighted average closing price prior to the
redemption date or 100% of the closing market price on the redemption date. The total amount payable by the
REIT in any calendar month shall not exceed $50 unless waived by the REIT’s trustees at their sole discretion.
The Trust has determined that the Units can be classified as equity and not financial liabilities because the
Units have the following features, as defined in IAS 32 (hereinafter referred to as the “puttable exemption”):
• Units entitle the holder to a pro rata share of the Trust’s net assets in the event of the Trust’s liquidation.
The Trust’s net assets are those assets that remain after deducting all other claims on its assets.
• Units are the class of instruments that are subordinate to all other classes of instruments because they have no
priority over other claims to the assets of the Trust on liquidation, and do not need to be converted into another
instrument before they are in the class of instruments that is subordinate to all other classes of instruments.
• All instruments in the class of instruments that are subordinate to all other classes of instruments have
identical features.
• Apart from the contractual obligation for the Trust to redeem the Units for cash or another financial asset, the
Units do not include any contractual obligation to deliver cash or another financial asset to another entity, or
to exchange financial assets or financial liabilities with another entity under conditions that are potentially
unfavourable to the Trust, and it is not a contract that will or may be settled in the Trust’s own instruments.
• The total expected cash flows attributable to the Units over their life is based substantially on the profit or loss,
the change in the recognized net assets and unrecognized net assets of the Trust over the life of the Units.
In addition to the Units meeting all of the above criteria, the REIT has determined it has no other financial
instrument or contract that has total cash flows based substantially on the profit or loss, the change in the
recognized assets, or the change in the fair value of the recognized and unrecognized net assets of the REIT.
The REIT also has no other financial instrument or contract that has the effect of substantially restricting or
fixing the residual return to unitholders.
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