IMMOEAST Annual Report 2006/07

176 IMMOEAST Annual Report 2006/07
IAS 40.55
IAS 16.15
IAS 16.19(d)
IAS 40.33
IAS 40.65
IAS 36.2
IAS 16.15
IAS 16.23
IAS 20.1
IAS 20.24f
Land was valued under the assumption that only the earnings potential of the site and not the earnings potential of
the object to be constructed form the basis for the recognition of revaluation income. The residual value method of
the income approach was used to value land, and the resulting residual value represents the fair value of the land.
Investment properties that were acquired for possible redesign and renovation (redevelopment) are also valued
using the residual value method. The classification as investment property is not changed by this redevelopment.
When a property is carried at fair value, this same approach must be retained up to disposal even if comparable
market transactions occur less often or market prices are not available as often.
3.5 Property under construction
Additional information on property under construction is provided under point 4.1.2.
Properties constructed by the company for the generation of rental and/or leasing income or for the realisation of an
increase in value are recognised as properties under construction and measured at cost. For this purpose, cost
includes expenses incurred up to the completion of construction or development. In accordance with IAS 16.19,
administrative expenses and other overheads are not included in acquisition or production cost. IAS 16 is applied up
to completion and the start of operations in the property. Beginning with the date of completion, the property is
measured at fair value in accordance with IAS 40. Any difference between the fair value of the property at this time
and the previous carrying value is recognised to the income statement as required by IAS 40.65. Since the revaluations
are generally considered to be material, they are shown on the same line of the income statement as other
income from the revaluation of investment properties.
Properties under construction are tested for impairment each year in accordance with IAS 36, whereby cost is compared
with the fair value (value in use) determined by an expert opinion. Additional information on the determination
of fair value is provided under point 3.4.
3.6 Tangible assets
In accordance with IAS 16, tangible assets are carried at cost less accumulated depreciation and any necessary writedowns
that result from impairment tests. Acquisition or production cost includes all costs incurred to bring the asset
to the location and condition necessary for it to be capable of operating in the intended manner. Cost includes not
only the purchase price, but also expenses incurred for site preparation, initial deliveries and handling costs, installation
and assembly costs and professional fees as well as estimated costs for dismantling and removing the object
and restoring the site.
When the payment for a tangible asset extends beyond the normal payment period, interest expense at market rates
is also recognised or included.
Depreciation is calculated on a straight-line basis beginning in the month of acquisition.
Government grants represent assistance provided to an entity through the transfer of resources in return for past or
future compliance with certain conditions relating to the operating activities of the entity. Government grants relating
to assets, including non-monetary grants at fair value, must be recorded on the balance sheet as deferred income or
deducted in determining the carrying value of the asset.