41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 203
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
OTHER INFORMATION
Accounting policies
Investment property (owned) and investment property (under development)
Investment property (owned) and investment property (under development) are held at fair value.
The external valuation of property assets involves significant judgement and changes to the core assumptions: rental
income, occupancy and property management costs, as well as estimated future costs, could have a significant impact
on the carrying value of these assets. Further details of the valuation process are included below.
Construction and borrowing costs are capitalised if they are directly attributable to the acquisition and construction of
a property asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress
and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets
are substantially ready for their intended use but stops if development activities are suspended. If the resulting
carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation
rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to
that part of the development cost financed out of general borrowings, to the average rate. During the year the average
capitalisation rate used was 3.1% (2021: 3.1%).
The recognition of acquisitions of investment property and land occurs at the date when control passes to Unite.
The recognition of disposals of investment property occurs on legal completion when control passes from Unite. In
accordance with IFRS 15, gains/(losses) from the disposal of investment property are recognised at a point in time.
Contingent consideration receivables are recognised on disposals where the amount of additional consideration
is readily identifiable. It is recognised at the constrained value determined by the amount that is highly probable to
be receivable at the time of the disposal, and any subsequent change in value is recognised in profit or loss in the
later period.
Investment property (leased)
The Group holds certain investment property under historic sale and leaseback arrangements, acting as an
intermediate lessor and subleasing its right-of-use assets. For each leased property, the Group assesses whether
a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability (see note 4.6a) with respect to all lease arrangements in which it is the lessee. The right-ofuse assets are initially measured at cost in accordance with IFRS 16 and subsequently at fair value in the balance sheet
with changes in fair value taken to the income statement in accordance with IAS 40.
Valuation process
The valuations of the properties are performed twice a year on the basis of valuation reports prepared by external,
independent valuers, having an appropriate recognised professional qualification. The fair values are based on market
values as defined in the RICS Appraisal and Valuation Manual, issued by the Royal Institution of Chartered Surveyors.
CB Richard Ellis Ltd, Jones Lang LaSalle Ltd and Messrs Knight Frank LLP, Chartered Surveyors were the valuers in the years
ended 31 December 2022 and 2021.
The valuations are based on:
•
Information provided by the Group such as current rents, occupancy, operating costs, terms and conditions of leases
and nomination agreements, capital expenditure, etc. This information is derived from the Group’s financial systems
and is subject to the Group’s overall control environment.
•
Assumptions and valuation models used by the valuers – the assumptions are typically market related, such as yield
and discount rates. These are based on their professional judgement and market observation.
The information provided to the valuers – and the assumptions and the valuation models used by the valuers – are
reviewed by the Property Leadership Team and the CFO. This includes a review of the fair value movements over the year.
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