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When an acquisition or investment is made, the transaction costs
to be incurred during a subsequent theoretical sale are recognised
directly on the income statement; any change in the fair value of a
building during the financial year is also recognised on the income
statements. These two movements are allocated to the reserve
during the appropriation of the result for the financial year.
1
If an investment property becomes owner-occupied, it is reclassified
as asset held for own use, and its fair value at the date of reclassifica-
tion becomes its cost for subsequent accounting purposes.
H. Development projects
Properties that are being built, renovated, developed or redeveloped
for future use as investment properties are classified as development
projects until the completion of the works and stated at their fair
value. This concerns nursing homes under construction or develop-
ment (extensions) and empty office buildings that are or will be under
renovation or redevelopment. At the time of completion of the works,
the properties are transferred from the development project category
to the properties available for rental category or to properties held for
sale if they are put up for sale. The fair value of the office buildings
which will undergo a renovation or redevelopment decreases as the
end of the lease and the beginning of the works approaches.
All costs directly associated with the purchase and construction,
and all subsequent capital expenditures qualifying as acquisition
costs, are capitalised. Provided the project exceeds one year, interest
charges are capitalised at a rate reflecting the average borrowing
cost of the Group.
I Properties leased for long periods
I Types of long leases
Under Belgian law, properties can be let for long periods under two
different regimes:
•
long ordinary leases: the lessor’s obligations are essentially those
under any lease: for instance, to ensure that space in a state of
being occupied is available to the lessee during the entire term
of the lease. This obligation is met by the lessor by bearing the
maintenance costs (other than rental) and the insurance costs
against fire and other damages;
•
long leases which involve the assignment of a real right by the
assignor to the assignee: in this case, the ownership passes
temporarily to the assignee who will bear namely maintenance
(other than rental) and insurance costs. Three contract types
fall under this category: (a) the long lease (“bail emphytéotique/
erfpachtovereenkomst”) which must last a minimum of 27 years
and a maximum of 99 years and can apply to land and/or
constructions; (b) the building lease (“droit de superficie/recht
van opstal”) which may not exceed 50 years but has no minimum
duration and (c) the usufruct right (“droit d’usufruit/recht van
vruchtgebruik”) which may not exceed 30 years and has no
minimum duration and can apply to land with a construction or
bare land. Under all these contracts, the assignor keeps a residual
right in that it will recover the full ownership of the property at the
end of the term of the assignment, including the ownership of the
constructions erected by the assignee, with or without indemnity
for these constructions, depending on the contractual conditions.
A purchase option for the residual right may however have been
granted, which the lessee can exercise during or at the end of the
lease.
II Long leases qualifying as finance leases
Provided these leases meet the criteria of a finance lease under IAS 17
§ 10, the Group as assignor will present them at their inception as
a receivable for an amount equal to the net investment in the lease
agreement. The difference between this amount and the book value of
the leased property (excluding the value of the residual right kept by
the Group) at the inception of the lease will be recorded on the income
statement for the period. Any payment made periodically by the
lessee will be treated by the Group partly as a repayment of the prin-
cipal and partly as a financial income based on a pattern reflecting a
constant periodic rate of return for the Group.
At each closing date, the residual right kept by the Group will be
accounted for at its fair value. It will increase each year and will
correspond, at the end of the lease, to the market value of the full
ownership. These changes in the fair value will be accounted for
under the item “Changes in the fair value of investment properties” on
the income statement.
Conversely, if Cofinimmo is assignee in a financial lease as defined
under IAS 17, it will recognise an asset at an amount equal to the
fair value of the leased property or, if lower, at the discounted value
of the minimum lease payments, the corresponding amount being
recorded as a financial debt. Collected rents from tenants will be
recorded under rental income. The subsequent effective payments
to the assignor during the term of the lease will be partially recorded
under financial charges and partially as the amortisation of the
related financial debt. At each closing date, the temporarily assigned
right will be accounted for at its fair value in accordance with IAS 40
- “Investment properties”, the progressive loss in value resulting from
the passing of time being recorded under the item “Changes in the fair
value of investment properties” on the income statement.
III Sale of future lease payments under a long lease not
qualifying as a finance lease
The amount collected by the Group as a result of the sale of the future
lease payments will be recognised in deduction of the property’s
value to the extent that this sale of lease payments is opposable
to third parties and that, as a consequence, the market value of the
property is reduced by the amount of the future lease payments
sold (hereafter “reduced value”). Indeed, pursuant to Article 1690 of
the Belgian Civil Code, a third party that would buy the properties, is
deprived of the right of receiving rental revenues.
The progressive reconstitution of the lease payments sold will be
recognised under the item “Writeback of lease payments sold and
discounted” on the income statement. This gradual constitution of the
non-reduced value relies on the basis of the interest rates and infla-
tion (indexation) conditions applied at the time of transfer and implied
in the price obtained by the Group at the moment from the transferee
for the sold receivables.
The changes in the fair value of the non-reduced property (i.e. as if
future rents were not transferred and as established at each close
by the independent experts in function of the real estate market
conditions) will be recorded separately under the item “Changes in
the fair value of investment properties” on the income statement to a
proportion equal to the quotient of the reduced value (resulting from
what is stated in the two previous paragraphs) by the non-reduced
value, such as these two values apply at the end of the period.
1
Following an adaptation of the treatment of transaction fees and costs in 2015, future hypothetical transaction fees and costs are no longer charged directly to equity when
buildings are acquired.
160
ANNUAL ACCOUNTS /
Notes to the consolidated accounts