97
96
STARHILL
GLOBAL
REIT
Annual
Report
FY 2014/15
Notes to the
Financial Statements
Depreciation
Depreciation on plant and equipment is recognised in the statement of total return on a straight-line basis over their estimated
useful lives of 2 to 8 years.
Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date.
3.4 Investment properties
Investment properties is property held either to earn rental income or for capital appreciation or for both. Investment properties
are measured at cost on initial recognition, and subsequently at fair value with any changes therein recognised in the statement
of total return. Fair value is determined in accordance with the Trust Deed, which requires investment properties to be valued
by independent registered valuers in such manner and frequency required under Appendix 6 of the CIS Code (“Property Fund
Appendix”) issued by MAS.
Subsequent expenditure relating to investment properties that has already been recognised is added to the carrying amount of
the asset when it is probable that future economic benefits, in excess of originally assessed standard of performance of the existing
asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
When an investment property is disposed of, the resulting gain or loss recognised in the statement of total return is the
difference between net disposal proceeds and the carrying amount of the property.
3.5 Intangible asset
Goodwill
Goodwill and negative goodwill arise upon the acquisition of subsidiaries.
Goodwill represents the excess of the fair value of the consideration transferred over the Group’s interest in the net fair value of
the identifiable assets acquired and liabilities and contingent liabilities assumed.
Goodwill arising on the acquisition of subsidiaries is presented in intangible asset. Goodwill is measured at cost less accumulated
impairment losses, and tested for impairment. Negative goodwill is recognised immediately in the statement of total return.
3.6 Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets
(including assets designated at fair value through the statement of total return) are recognised initially on the trade date,
which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial assets expire, or
it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is
created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when,
the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following category: loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such
assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition,
loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, and trade and other receivables. Cash and cash equivalents
comprise cash at bank and fixed deposits.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued on the date that they are originated. All other financial liabilities
(including liabilities designated at fair value through the statement of total return) are recognised initially on the trade
date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the
Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities
are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise borrowings and trade and other payables.
(iii) Unitholders’ funds
Unitholders’ funds represent the residual interest in the Group’s net assets upon termination and are classified as
equity. Expenses incurred in the issuance and placement of units (if any) in the Group are deducted directly against
unitholders’ funds.
(iv) Convertible preferred units
Convertible preferred units issued by the Trust are classified as equity based on the principal terms of the CPU as
disclosed in Note 15. Any directly attributable transaction costs are recognised as a deduction from the fair value of the
consideration received.
(v) Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures arising from
operating, financing and investing activities. Derivative financial instruments are not used for trading purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments. As at 30 June 2015 and
31 December 2013, the Group did not adopt hedge accounting for its derivative financial instruments.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the statement of total
return as incurred.
Subsequent to initial recognition, derivatives are measured at fair value. All changes in fair value is recognised immediately
in the statement of total return. However, if derivatives qualify for hedge accounting, subsequent to initial recognition,
changes in fair value therein are accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect
total return, the effective portion of changes in the fair value of the derivative is recognised and presented in the hedging
reserve in unitholders’ funds. The amount recognised in unitholders’ funds is removed and included in the statement of
total return in the same period as the hedged cash flows affect total return under the same line item in the statement
of total return as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised
immediately in total return.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in unitholders’ funds
remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised
in unitholders’ funds is transferred to the carrying amount of the asset when it is recognised. In other cases, the amount
recognised in unitholders’ funds is transferred to the statement of total return in the same period that the hedged item
affects total return.
