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The costs of the defined benefits are classified under the following
categories:
•
cost of services (cost of services rendered during the period,
cost of passed services, as well as gains and losses arising from
reductions and liquidations);
•
net interests (charges);
•
revaluations.
The Group presents the first two components of the defined benefits
costs in the net result under “Personnel Cost”.
The accrued benefit obligations recorded in the consolidated state-
ment of the financial position represents the actual amount of the
deficit of the defined benefits systems od the Group.
P. Provisions
A provision is recognised on the balance sheet when the Group has
a legal or contractual obligation resulting from a past event, and
if it is likely that resources will be required to settle the obligation.
Provisions are determined by discounting the expected future cash
flows at the market rate reflecting, where appropriate, the risk specific
to the liability.
Q. Trade debts and other debts
Trade debts and other debts are stated at cost.
R. Operating revenues
Operating revenues include revenues from lease contracts on build-
ings and revenues from real estate services.
Revenues from lease contracts are recorded under the rental income
item. Some lease contracts allow for a period of free occupancy
followed by a period during which the agreed rent is due by the
tenant. In this case, the total amount of the contractual rent to be
collected until the first break option for the tenant is recognised
on the income statement (item “rental income”) pro rata temporis
over the length of the lease contract, beginning at the start of the
occupancy and ending at the first break option (i.e. the firm term of
the lease). More accurately, the contractual rent expressed in annual
amount is first recognised as revenue and the rent-free period spread
over the firm term of the lease is then booked as an expense. Hence,
an accrued income account is debited at the start of the lease for an
amount corresponding to the rental income (net of the cost of rent-
free periods) already earned but not yet expired.
When real estate experts make an estimation of the value of the build-
ings based on the discounted value of future cash flows method, they
include in these values the total rents yet to be collected. Hence, the
accrued income account referred to above is redundant with the part
of the buildings representing rents already earned and recognised on
the income statement but not yet due. Therefore, in order to avoid this
redundancy, which would wrongfully swell the total of the balance
sheet and of the shareholders’ equity, the amount under the accrued
income account is reversed against a charge booked under the item
“Other result on the portfolio”. Once the date of the first break option
is passed, no charge is to be recorded on the income statement, as
would have been the case without this reverse booking.
As a result, the operating result before result on the portfolio (and thus
the current income of the analytical form) reflects the rents spread
over the firm term of the lease, whereas the net result reflects the
rents to date and as they are cashed.
The concessions granted to tenants are, on their part, booked as
charges over the firm term of the lease. They refer to incentives
consisting of the financing by the landlord of certain expenses the
tenant is normally responsible for, such as the cost of the fitting
works of private surfaces for example.
S. Operating expenses
I Service costs
Service costs paid, as well as those borne on behalf of the tenants,
are included in the direct property expenses. Their reclaiming from the
tenants is presented separately.
II Works carried out on properties
Works carried out that are the responsibility of the building owner are
recorded in the accounts in three different ways, depending on the
type of works:
•
expenditure on maintenance and repairs that does not add any
extra functionality to or does not increase the standard of comfort
of the building is considered as current expenditure for the period,
and as property costs;
•
extensive renovation works: these are normally undertaken at
intervals of 25 to 35 years and involve virtually rebuilding the
building whereby, in most cases, the existing carcass work is
re-used and state-of-the-art building techniques are applied;
on completion of such renovation works, the property can be
considered as new and expenditure is capitalised;
•
improvement works: these are works carried out on an occasional
basis to add functionality to the property or significantly enhance
the standard of comfort, thus making it possible to raise the rent
and, hence, the estimated rental value. The costs of these works
are capitalised by reason of the fact that and insofar as the expert
normally recognises a corresponding appreciation in the value of
the property. Example: installation of an air conditioning system
where one did not previously exist.
Works that generate expenses to be activated are identified taking
into account the previous criteria during the preparation of the
budgets. The capitalised expenses are related to materials, engi-
neering works, technical studies, internal costs, architect fees and
interests during the construction.
III Commissions paid to letting agents and
other transaction costs
Commissions relating to property lettings are entered under
current expenditure for the year, under the item “commercial costs”.
Commissions relating to the acquisition of properties, transfer duties,
notary fees and other ancillary costs are considered as transaction
costs and included in the acquisition cost of the acquired property.
These costs are also considered as part of the acquisition cost when
the purchase is done through a business combination. Commissions
on property sales are deducted from the disposal price obtained to
determine the gain or loss made.
Property valuation costs and technical valuation costs are always
entered under current expenditure.
IV Financial result
Net financing costs comprise interest payable on borrowings, calcu-
lated using the effective interest rate method, and gains and losses
on hedging instruments that are recognised on the income statement
(see F).
Interest income is recognised on the income statement as it accrues,
taking into account the effective yield on the asset. Dividend income
is recognised on the income statement on the date that the dividend
is declared.
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ANNUAL ACCOUNTS /
Notes to the consolidated accounts