The financial instruments classified as financial assets at fair
value through profit or loss include interest rate swap
arrangements. Recognition of the derivative financial instruments
takes place when the economic hedging contracts are entered into.
They are measured initially and subsequently at fair value,
transaction costs are included directly in finance costs. Gains or
losses on derivatives are recognised in the Statement of
Comprehensive Income in net change in fair value of financial
instruments at fair value through Other Comprehensive income.
These financial instruments would be classified as Level 2 fair
value measurements, as defined by IFRS 7, being those derived from
inputs other than quoted prices. There were no transfers between
levels in the current period.
The fair values of financial assets and financial liabilities
are determined as follows:
-- Interest rate swap contracts are measured using the Mid point
of the yield curve prevailing on the reporting date. The valuations
have been made on a clean basis in that they do not include accrued
interest from the previous settlement date to the reporting date.
The fair value represents the net present value of the difference
between the contracted rate and the valuation rate when applied to
the projected balances for the period from the reporting date to
the contracted expiry dates.
Financial assets are derecognised only when the contractual
rights to the cash flows from the financial asset expire or the
Group transfers substantially all risks and rewards of
ownership.
The Group assesses at each financial position date whether there
is objective evidence that a financial asset or group of financial
assets is impaired. If there is objective evidence (such as
significant financial difficulty of the obligor, breach of
contract, or it becomes probable that the debtor will enter
bankruptcy), the asset is tested for impairment. The amount of the
loss is measured as the difference between the asset's carrying
amount and the present value of the estimated future cash flows
(that is the effective interest rate computed at initial
recognition). The carrying amount of the asset is reduced through
use of an allowance account. The amount of the loss is recognised
in the Statement of Comprehensive Income.
In relation to trade receivables, a provision for impairment is
made when there is objective evidence (such as the probability of
insolvency or significant financial difficulties of the debtor)
that the Group will not be able to collect all of the amounts due
under the original terms of the invoice. Impaired debts are
derecognised when they are assessed as uncollectible.
If in a subsequent period the amount of the impairment loss
decreased and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed to the extent that the
carrying value of the asset does not exceed its amortised costs at
the reversal date. Any subsequent reversal of an impairment loss is
recognised in the Statement of Comprehensive Income.
Financial liabilities
Liabilities within the scope of IAS 39 are classified as
financial liabilities at fair value through profit or loss or other
liabilities as appropriate.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
All loans and borrowings are classified as other liabilities.
Initial recognition is at fair value less directly attributable
transaction costs. After initial recognition, interest bearing
loans and borrowings are subsequently measured at amortised costs
using the effective interest method.
Financial liabilities included in trade and other payables are
recognised initially at fair value and subsequently at amortised
cost. The fair value of a non-interest bearing liability is its
discounted repayment amount. If the due date of the liability is
less than one year, discounting is omitted.
Hedge accounting
Hedges of interest rate risk on firm commitments are accounted
for as cash flow hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instruments and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument is highly effective in offsetting
changes in fair values or cash flows of the hedged item. The
effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in
other comprehensive income. The gain or loss relating to the
ineffective portion is recognised immediately in profit or loss,
and is included in the 'other gains and losses' line item.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to profit or loss in the
periods when the hedged item is recognised in profit or loss, in
the same line of the income statement as the recognised hedged
item. However, when the forecast transaction that is hedged results
in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously accumulated in equity
are transferred from equity and included in the initial measurement
of the cost of the non-financial asset or non-financial
liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge
accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is recognised when
the forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in equity is recognised immediately in
profit or loss.
Prepayments
Prepayments are carried at cost less any accumulated impairment
losses.
Share capital
Shares are classified as equity when there is no obligation to
transfer cash or other assets.
Convertible Unsecured Loan Stock
Convertible Unsecured Loan Stock consists of both a liability
and equity element. On issue of convertible loan stock, management
assess the fair value of the liability by reference to the cash
flow to redemption associated with the instrument, discounted at a
market rate of interest. The difference between the issue proceeds
and the fair value of the liability is allocated to the equity
element of the instrument.
Trade and other receivables
Trade and other receivables are initially recognised at fair
value, and subsequently where necessary re-measured at amortised
cost using the effective interest method. A provision for
impairment of trade receivables is established when there is
objective evidence the Group will not be able to collect all
amounts due according to the original terms of the receivables.
Trade and other payables
Trade and other payables are initially recognised at fair value,
and subsequently where necessary re-measured at amortised cost
using the effective interest method.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognised as
finance costs over the period of the borrowings using the effective
interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a prepayment for
liquidity services and amortised over the period of the facility to
which it relates.
Borrowings are classified as non-current liabilities as the
Group has a right to defer settlement of the liability for at least
12 months after the date of the Balance Sheet.
Tax
Income tax
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the date of the
Balance Sheet. Tax is recognised in the income statement.
Value added tax
Revenues, expenses and assets are recognised net of the amount
of value added tax except:
i. Where the value added tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case the value added tax is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
ii. Receivables and payables that are stated with the amount of
value added tax included. The net amount of value added tax
recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the balance sheet.
REIT Status
The Company entered the REIT regime on 22 November 2010 and is
not exposed to tax on qualifying UK property rental income and
gains arising from disposal of exempt property assets, for this
reason deferred tax has not been provided for on revaluations.
To continue to benefit from UK REIT tax regime, the Group is
required to comply with certain conditions in respect of the
principal company of the Group, the Group's qualifying activity and
its balance of business. NewRiver Retail Limited is required to pay
Property Income Distributions equal to at least 90% of the Group's
exempted net income. The Group continues to meet these conditions
and Management intends that the Group should continue as a UK REIT
for the foreseeable future.
Employee benefits
i. Share-based payments - Share Options
Grafico Azioni Newriver Reit (LSE:NRR)
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