Abacus Property Group – Annual Financial Report 2017

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NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2017 ABACUS PROPERTY GROUP 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis, except for investment properties and derivative financial instruments which have been measured at fair value, interests in joint ventures and associates which are accounted for using the equity method, and certain investments and financial assets measured at fair value. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000) unless otherwise stated under the option available to the Group under ASIC Corporations Instrument 2016/191. The Group is an entity to which the class order applies. (b) Statement of Compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS), as issued by the AASB and IASB respectively. (c) New accounting standards and interpretations (i) Changes in accounting policy and disclosures The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards and interpretations effective as of 1 July 2016. The Group has adopted the following new or amended standards which became applicable on 1 July 2016: - AASB 2014-3 – Accounting for Acquisitions of Interests in Joint Ventures - AASB 2014-4 – Clarification of Acceptable Methods of Depreciation and Amortisation - AASB 1057 – Application of Accounting Standards - AASB 2014-9 – Equity Method in Separate Financial Statements - AASB 2015-1 – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle - AASB 2015-2 – Disclosure Initiative: Amendments for AASB 101 Presentation of Financial Statements - AASB 2015-5 – Investments Entities: applying the consolidation exception - AASB 2015-9 – Scope and Application Paragraphs (AASB 8, AASB 133 and AASB 1057) The adoption of these amended standards has no material impact on the financial statements of the Group. (ii) Accounting Standards and Interpretation issued but not yet effective Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 30 June 2017. The significant new standards or amendments are outlined below: - AASB 9 Financial Instruments (effective 1 January 2018 / applicable for Group 1 July 2018) This standard includes requirement to improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139 Financial Instruments: Recognition and Measurement. The Standard contains requirements in the areas of classification, measurement, hedge accounting and derecognition. The most significant change for the adoption of AASB 9 will be the introduction of the new impairment model relating to the Group’s property loans. It is likely that the Group will recognise an impairment loss upon initial application of the new credit loss model. As it is the first-time application of the Standard, the Group will adjust the retained earnings of the Group as at 1 July 2018 as opposed to restating the previous year amounts. 82
ABACUS PROPERTY GROUP NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2017 22. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (c) New accounting standards and interpretations (continued) - Revenue from Contracts with Customers (effective 1 January 2018 / applicable for Group 1 July 2018) AASB15 replaces the current revenue recognition standards AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations. AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Early adoption of this Standard is permitted. The Group has undertaken an analysis to scope out its revenue streams to identify specific impacts of the Standard. The revenue streams identified are: - Rental / hotel income - Finance income - Fee income - Sale of inventory The majority of the Group’s revenue streams have application under other relevant standards and therefore, application of AASB 15 does not apply (rental income, finance income). Where the Standard does apply, the Group has assessed that there will be no change to the recognition or measurement of revenue upon application of the Standard or has considered that the impact to the Group’s results to be immaterial. - Leases (effective 1 January 2019 / applicable for Group 1 July 2019) AASB 16 supersedes: AASB 117 Leases and associated interpretations. The key features of AASB 16 are as follows: Lessee accounting - Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset of low value - A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities - Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease - AASB 16 contains disclosure requirements for lessees Lessor accounting - AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently - AABB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk Early adoption is permitted, provided the new revenue standard, AASB15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as AASB 16. The Group has entered into a Net Lease Proposal and upon execution of the Lease Agreement, the Group will review the terms and consider its impact. 83
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Abacus Property Group – Annual Financial Report 2017

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