41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 198
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
NOTES TO THE FINANCIAL STATEMENTS continued
Section 2: Results for the year continued
2.4 Revenue and costs continued
Management and performance fees continued
The Group is entitled to a USAF performance fee if the joint venture outperforms certain benchmarks. The Group
recognises a USAF performance fee at a point in time in the year to which the fee relates. The Group initially assesses
the probability of a fee being earned and its transaction price at half year and adjusts for any potential risks to
receiving this income at year-end, when the achieved outturn is known. The USAF performance fee is settled within
12 months of the year to which the fee relates and the Group receives an enhanced equity interest in USAF as
consideration for the performance fee.
The Group is entitled to an LSAV performance fee if the joint venture outperforms certain benchmarks over its life
ending in 2032. The Group recognises an LSAV performance fee at an amount which is considered “highly probable”
to become due based upon estimates of the future performance of the joint venture; such estimates include future
rental income and the discount rate (yield). Prior to the maturity of the joint venture, the Group pro-rates the total LSAV
performance fee over the life of the joint venture and recognises a cumulative catch-up to the currently completed
term where sufficient certainty over outperformance of the benchmark is determined to exist.
As per IFRS 15, the estimated amount of variable consideration is included in the transaction price only to the extent
that it is highly probable that a significant reversal in the amount of revenue recognised will not occur when the
uncertainty associated with the variable consideration is resolved. The performance fee is variable and dependent
on meeting specific performance targets. Accordingly where there is too much uncertainty over the cumulative
outperformance of the benchmarks, particularly in earlier periods of the performance fee period, which cover each 10
year term of the venture, then no amounts of performance fee can be recognised as it is not highly probable that the
performance fee will be earned.
Management and performance fees are presented in revenue net of the Group’s share of the corresponding expense
within the relevant fund.
At 31 December 2022, no amounts are deemed to meet the highly probable criteria and therefore we have not
disclosed any future fees receivable from these ongoing contracts.
Acquisition fees
The Group receives acquisition fees from its joint venture partners. This revenue is linked to the acquisition of land or
property and is therefore recognised at the point in time that control of the asset is transferred to the joint venture.
The transaction price for this revenue stream is stipulated in the joint venture agreement as a percentage of the value
of the acquisition. No such land or property acquisitions have occurred in 2022 or 2021.
