Growthpoint Properties Ltd (Growthpoint or the company) is acompany domiciled in South Africa. The address of the company’s registered office is The Place, 1 Sandton Drive, Sandton. The consolidated financial statements include the financial  statements of Growthpoint, its subsidiary companies and controlled  trusts (together referred to as the Group and individually as group companies), the share of the profit or loss and other comprehensive  income of equity-accounted investees, and the Group’s share of the assets, liabilities, income, expenses and cash flows of jointly  controlled operations. Where reference is made to the “entity”, this means the company or the Group as appropriate in the context.

Growthpoint is a Real Estate Investment Trust (REIT) company and is the largest South African listed property company which owns a property portfolio of 471 directly owned properties in South Africa valued at R71,6 billion, 53 properties valued at R22,0 billion through its 65.0% investment in Growthpoint Properties Australia (GOZ), and a 50% interest in the properties of the V&A Waterfront.

From 1 July 2013, Growthpoint became a REIT company and the existing linked unit capital structure converted to an all-equity capital structure in order to align Growthpoint’s linked unit capital structure with the capital structures of international REITs. The primary business of Growthpoint is long-term investment in quality, rental-generating properties. Properties are maintained, upgraded and refurbished, where necessary, so as to increase their long-term value.

The Group financial statements comprise the consolidated financial statements. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements, the requirements of the South African Companies Act, 2008, as amended, and incorporate the principal accounting policies set out below.

Except for the new standards adopted as set out below, all accounting policies applied in the preparation of these consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated financial statements.

Growthpoint adopted the following new standards and amendments:

There was no material impact on the financial statements identified based on management’s assessment of these standards.

The financial statements of the company are presented separately from the consolidated financial statements and were approved by the directors on 25 August 2015, the same date as these financial statements. The separate financial statements are available from the Company Secretary.

The financial statements are prepared on the fair value basis for investment properties as set out in note 1.3, investment properties reclassified as held for sale as set out in note 1.7, and financial instruments as set out in note 1.2. Other assets, liabilities and equity are stated at historic cost. Fair value adjustments (where applicable) do not affect the calculation of distributable earnings but affect the net asset value per share to the extent that adjustments are made to the carrying values of assets and liabilities.

The consolidated financial statements are presented in South African Rand (Rand), which is the company’s functional currency. All financial information presented in Rand has been rounded to the nearest million.

The Group accounts for business combinations on or after 1 July 2009 by applying the acquisition method as at the acquisition date and measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, plus the fair value of any existing equity interest, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date. If this amount is negative, the Group recognises a gain on bargain purchase in profit or loss.

The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those through its power over the entity. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration. If a business combination results in the termination of pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in other expenses.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably.

The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree.

Transaction costs that the Group incurs in connection with a business combination, such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees, are expensed as incurred.

Acquisitions between 1 July 2003 and 1 July 2009

For acquisitions between 1 July 2003 and 1 July 2009, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, the Group immediately recognised a bargain purchase gain in profit or loss.

The Group capitalised transaction costs in connection with the business combination, other than those associated with the issue of debt or equity interests, as part of the cost of the acquisition.

Acquisitions of non-controlling interests that do not result in a loss of control are accounted for as transactions with equity holders in their capacity as equity holders and therefore, no goodwill is recognised as a result of such transactions.

Subsidiaries are those entities controlled by the Group.The financial results of subsidiaries and controlled trusts are included in the consolidated financial statements from the date that control commences until the date that control ceases.

A list of the Group’s subsidiaries is set out in note 44.1, related party transactions.

The Group’s interests in equity-accounted investees comprise interests in joint ventures. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and the other comprehensive income of equity-accounted investees, until the date on which joint control ceases.

A jointly controlled operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations to the liabilities, relating to the arrangement. Jointly controlled operations are accounted for by including the Group’s share of the jointly controlled assets, liabilities, income, expenses and cash flows on a line-by-line basis in the financial statements from the date that joint control commences until the date that joint control ceases.

Intra-group balances, transactions and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint operations and equity-accounted investees are eliminated to the extent of the Group’s interest in the joint operations and investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Financial instruments are contracts that give rise to a financial asset of one entity, and a financial liability or equity instrument of another entity. All transaction costs relating to “financial instruments at fair value through profit or loss” are expensed immediately. Any gains or losses on these instruments arising from fair value adjustments, where appropriate, do not affect distributable earnings. The Group recognises financial instruments on the date it commits to purchase or sell such instruments. From this date, any gains and losses in the fair value of the financial assets and financial liabilities are recorded in profit or loss.

Certain financial instruments are designated upon initial recognition as “at fair value through profit or loss” as this eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising gains or losses on them on different bases.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset 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 entity is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

In the prior year, the listed investments in Acucap and Sycom were designated as available-for-sale financial assets and were initially recognised at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, they were measured at fair value and changes therein were recognised in other comprehensive income and presented in a non-distributable reserve in equity. When the investments were derecognised, the gain or loss accumulated in equity was reclassified to profit or loss.

Listed investments in Stenham European Shopping Centre Fund (SESCF) are designated as at fair value through profit or loss upon initial recognition as such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. The underlying investment in SESCF is property and therefore it would give greater meaning to the financial statements if this was treated in the same way as the other property investment, i.e. at fair value through profit or loss.

Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, with any resultant gain or loss recognised in profit or loss.

Long-term loans are initially recognised and subsequently measured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. Interest earned on long-term loans is recognised on an accrual basis using the effective interest method.

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market, are initially recognised at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost which approximates fair value. An estimate is made for credit losses based on a review of all outstanding amounts at year end. Bad debts are written off to profit or loss during the year in which they are identified. Interest earned on trade receivables is recognised on an accrual basis using the effective interest method.

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value. Cash and cash equivalents are measured at amortised cost, which approximates fair value. Interest earned on cash invested with financial institutions is recognised on an accrual basis using the effective interest method.

Trade payables are initially recognised and subsequently measured at amortised cost which approximates fair value. Interest payable on trade payables is recognised on an accrual basis using the effective interest method.

The Group uses derivative financial instruments to hedge its exposure to interest rate risk arising from its financing activities and to hedge its exposure to foreign currency risk.

In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, as the hedge relationship is not designated as a hedge for accounting purposes, the derivatives are accounted for as trading instruments.

Derivative financial instruments are initially recognised and subsequently measured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. Fair value adjustments are transferred to a non-distributable reserve in the statement of changes in equity.

The Group holds interest rate swap and foreign exchange derivative instruments. The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to terminate the swap at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of foreign exchange contracts is valued by discounting the forward rates applied at year end to the open hedged positions.

Non-derivative financial liabilities comprising long-term interest-bearing loans are initially recognised and subsequently measured at fair value, with gains or losses being recognised in profit or loss. The fair value is estimated by discounting the future cash payments using the market rate applicable at the reporting date. Interest payable on financial liabilities is recognised on an accrual basis using the effective interest method.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Group has a legally enforceable right to offset the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. An entity currently has a legally enforceable right to set-off if that right is not contingent on a future event and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. Gross settlement is equivalent to net settlement if, and only if, the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and process receivables and payables in a single settlement process or cycle.

Investment property consists of land and buildings, installed equipment and undeveloped land held to earn rental income for the long term and subsequent capital appreciation.

Properties are initially recognised at cost on acquisition, including all costs directly attributable to the acquisition, and subsequent additions that will result in future economic benefits and whose cost can be measured reliably are capitalised. Investment property under construction is valued at fair value.

Direct costs relating to major capital projects are capitalised until the properties are brought into commercial operation.

Subsequent to initial recognition, investment properties are measured at their fair value. Fair value adjustments are transferred to a non-distributable reserve in the statement of changes in equity.

Investment property is maintained, upgraded and refurbished, where necessary, in order to preserve or improve the capital value as far as it is possible to do so. Maintenance and repairs which neither materially add to the value of the properties nor prolong their useful lives are charged against profit or loss.

Independent valuations are obtained on a rotational basis, ensuring that every property is valued at least once every three years by an external independent valuer. The directors value the remaining properties annually on an open-market basis. The calculations are prepared by considering the aggregate of the net annual rent receivable from the properties and, where relevant, associated costs, using the discounted cash flow method. This method takes projected cash flows and discounts them at a rate which is consistent with comparable market transactions. The discount rates reflect the risks inherent in the net cash flows and are constantly monitored by reference to comparable market transactions. Undeveloped land is valued in terms of the internationally accepted and preferred method of comparison.

Gains or losses on subsequent measurement or disposals of investment properties are recognised in profit or loss. Such gains or losses are excluded from the calculation of distributable earnings.

When properties comprise a portion that is held to earn rental or for capital appreciation, and another portion that is held for use in the production or supply of goods or services or for administrative purposes, then these portions are accounted for separately only if these portions could be sold separately.

If they cannot be sold separately, the entire property is accounted for as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Investment property held under an operating lease relates to long-term land leases and is recognised in the Group’s statement of financial position at its fair value. This accounting treatment is consistently applied for all such long-term land leases.

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets.

Where the net recognised amount of the identifiable assets acquired and liabilities assumed exceeds the fair value of the consideration transferred (including the recognised amount of any non-controlling interest in the acquiree and the fair value of any existing equity interest), this excess is recognised immediately in profit or loss (gain on bargain purchase).

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.

Other intangible assets that are acquired by the entity, which have finite useful lives, are recognised initially at cost and subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits of the asset to which it relates.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. Subsequently, the amortisation is transferred to a non-distributable reserve in the statement of changes in equity.

The residual value of the intangible asset is assessed as Rnil and the estimated total useful lives for the current and comparative periods are as follows:

Amortisation methods, useful lives and residual values are reassessed annually.

Items of equipment are recognised initially at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment losses. Items of equipment are depreciated from the date they are ready for use. Depreciation is based on the cost of the asset less its residual value and recognised on a straight-line basis, over the current estimated useful lives of the assets. The estimated useful lives of the assets for the current and comparative periods are:

Depreciation methods, useful lives and residual values are reassessed annually.

Subsequent expenditure relating to an item of equipment is capitalised when it is probable that future economic benefits will flow to the entity and its cost can be measured reliably.

All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

The carrying amount of the Group’s non-financial assets, other than investment property and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated at each reporting date.

For the purpose of impairment testing, assets are grouped together into the smaller group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of the other assets or groups of assets (the cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of the cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses in respect of goodwill are not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the measurement of assets (and all assets and liabilities in a disposal group) is brought up to date in accordance with applicable IFRS. Then, on initial classification as held for sale, non-current assets and disposal groups are recognised at the lower of the carrying amount and fair value less costs to sell. Investment properties classified as held for sale are measured in accordance with IAS 40 Investment property at fair value with gains and losses on subsequent measurement being recognised in profit or loss.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. These financial guarantee contracts are classified as insurance contracts as defined in IFRS 4 Insurance contracts.

A liability is recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle the contract and a reliable estimate can be made of the amount of the obligation. The amount recognised is the best estimate of the expenditure required to settle the contract at the reporting date. Where the effect of discounting is material, the liability is discounted. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

The Group performs liability adequacy tests on financial guarantee contract liabilities to ensure that the carrying amount of the liabilities is sufficient in view of estimated future cash flows. When performing the liability adequacy test, the Group discounts all expected contractual cash flows and compares this amount to the carrying value of the liability. Where a shortfall is identified, an additional provision is made.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and, in addition, a reliable estimate of the amount can be made. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Shares in the company held by Growthpoint Management Services (Pty) Ltd and unvested restricted shares held for employee participants in the Staff Incentive Scheme Trust are classified as treasury shares. The cost price of these shares, together with related transaction costs, is deducted from equity, but disclosed separately in the statement of changes in equity. The issued and weighted average number of shares is reduced by the treasury shares for the purposes of the basic and headline earnings per share calculations. The issued number of shares is not reduced by the treasury shares for the purpose of the dividend per share calculations. Dividends received on treasury shares are recognised directly in equity.

When treasury shares held for employee participants vest in such participants, the shares will no longer be classified as treasury shares, their cost will no longer be deducted from equity and their number will be taken into account for the purposes of basic and headline earnings per share calculations.

Dividends or other distributions to the holders of equity instruments, in their capacity as owners, are recognised directly in equity on the date of declaration.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are re-translated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on re-translation are recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s presentation currency (Rand) at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rand at exchange rates at the dates of the transactions (an average rate per month is used).

When the Group disposes of only part of its interest in a subsidiary that includes foreign operations while retaining control, the relevant proportion of the cumulative amount is re-attributed to non-controlling interests.

Foreign currency differences on translation of the financial position and results of a foreign operation into the Group’s presentation currency are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (FCTR), except to the extent that the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of, in part or in full, such that control, significant influence or joint control is lost, the cumulative amount in the FCTR is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant portion of the cumulative amount is reclassified to profit or loss.

The non-distributable reserve relates to items that are not distributable to shareholders, such as fair value adjustments on the revaluation of investment property, long-term loans, borrowings and derivatives, the amortisation of intangible assets, share-based payment transactions, the straight-line lease income adjustment, non-cash charges, capital items, deferred taxation, bargain purchases and reserves with the non-controlling interest.

The Group is party to numerous leasing contracts as the lessor of property. All leases are operating leases, which are those leases where the Group retains a significant portion of the risks and rewards of ownership.

An adjustment is made to contractual rental income earned to bring to account in the current period the difference between the rental income that the entity is currently entitled to and the rental for the period calculated on a smoothed, straight-line basis over the period of the lease term. This does not affect distributable earnings.

The Group provides certain incentives for the lessee to enter into lease agreements. Initial periods of the lease term may be agreed to be rent-free or at a reduced rent. All incentives are recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments. The Group recognises the aggregate cost of incentives as a reduction of rental income over the lease term, on a straight-line basis.

The Group is party to leasing contracts as the lessee of some property and equipment. Leases are classified as operating leases where substantially all the risks and rewards associated with ownership of the asset are not transferred from the lessor to the lessee. Operating lease rentals with fixed escalation clauses are recognised in profit or loss on a straight-line basis over the lease term. The resulting difference arising from the straight-line basis and contractual cash flows is recognised as an operating lease asset or operating lease liability.

Revenue from the letting of investment property comprises gross rental income and recoveries of fixed operating costs, net of value added tax. Rental income is recognised in profit or loss on a straight-line basis over the term of the lease. Recoveries of costs from lessees, where the entity merely acts as an agent and makes payment of these costs on behalf of lessees, are offset against the relevant costs. The Group recognises the aggregate cost of incentives as a reduction of rental income over the lease term, on a straight-line basis.

When considered material, letting commissions and tenant installations are written off over the period of the lease. Letting commissions paid in respect of new developments are capitalised to the cost of the property.

Operating profit included in profit or loss represents the net property income earned from investment property, adjusted for other operating expenses and income.

Income tax for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income, after deducting the qualifying distribution for that year of assessment, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years. In accordance with the status as a REIT, dividends declared meet the requirements of a qualifying distribution for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962 (as amended) (Income Tax Act).

Deferred tax is recognised for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences:

No deferred tax was recognised on the fair value of investment property. Investment property will be realised through sale, and subsequent to the conversion to a REIT, capital gains tax is no longer applicable in terms of section 25BB of the Income Tax Act.

The deferred tax relating to the amortisation of the intangible asset is initially recognised in profit or loss and is subsequently transferred to a non-distributable reserve in the statement of changes in equity. The amount of deferred tax recognised is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates expected to be applied to temporary differences when they reverse, based on tax laws enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to either settle current tax liabilities and assets on a net basis or realise the assets and settle the liabilities simultaneously.

A deferred tax asset is recognised for deductible temporary differences and unused tax losses to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Dividends received by or accrued to South African tax residents are exempt from dividend withholding tax, but will be included in the gross income of such shareholders and will not be exempt from the income tax in terms of the exclusion to the general dividend exemption contained in section 10(1)(k)(i)(aa) of the Income Tax Act because they are dividends distributed by a REIT. With effect from 1 January 2014, any dividend received by a non-resident from a REIT will be subject to dividend withholding tax at 15%, unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation between South Africa and the country of residence of the non-resident shareholder. Dividends received by non-resident shareholders from a REIT will not be taxable as income in South Africa and instead will be treated as ordinary dividends which are exempt from income tax in terms of the general dividend exemption section 10(1)(k) of the Income Tax Act.

Withholding tax relating to foreign distributions received is recognised as part of the tax expense, and the financial results are reflected at the gross amounts, before withholding tax.

Borrowing costs incurred on qualifying assets are capitalised until such time as the assets are substantially ready for their intended use. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use. Capitalisation is suspended during extended periods in which active development is interrupted.

All other borrowing costs are expensed in profit or loss in the period in which they are incurred using the effective interest method.

The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. Short-term employee benefits are measured on an undiscounted basis. The accrual for employee entitlements to salaries, bonuses, staff incentive schemes and annual leave represents the amount which the Group has a present legal or constructive obligation to pay as a result of employees’ services provided up to the reporting date.

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to the defined contribution provident plan are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

In respect of linked units allocated to employees, subsequent to the 8,5 million linked units relating to the management “buy-in” transaction but before the conversion to a REIT, the grant-date fair value of the linked unit payment award granted to employees was recognised as an employee expense, with a corresponding increase in liabilities, over the period that the employees became unconditionally entitled to the awards in terms of IFRS 2 Sharebased payment transactions. The liability was remeasured at each reporting date and at settlement date based on the fair value of the linked units. Any changes in the liability were recognised as employee benefit expenses in profit or loss.

The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

Amortisation of intangible assets, as well as expenses relating to the staff incentive scheme are recurring expenses and are classified as non-cash charges. Impairments of goodwill, although not recurring, are also classified as non-cash charges as the expense relates to intangible assets.

Costs incurred on business acquisitions and items reclassified from other comprehensive income to profit or loss are classified as capital items.

Determination and presentation of operating segments

The Group determines and presents operating segments based on the information that is provided internally to the Executive Management Committee (Exco), the Group’s operating decision-making forum. The Group has five main reportable segments namely:

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by Exco to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to Exco include items directly attributable to a segment or a region, as well as those that can be allocated on a reasonable basis. Unallocated items are reported by location and mainly comprise long-term loans granted, intangible assets, derivatives, trade and other receivables, cash and cash equivalents, deferred tax, other non-current liabilities (borrowings), trade and other payables, and the related income and expenses to these items.

Segment capital expenditure is the total cost incurred during the period on investment property, including costs incurred on the investment property of the V&A Waterfront, as well as other joint ventures.

In addition to the main reportable segments, the Group also includes a geographical analysis of net property income, excluding straight-line lease income adjustment and investment property. The following segments have been identified:

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information regarding judgements that have the most significant effect on the amounts recognised in the financial statements, as well as the key sources of estimation uncertainty, is set out in:

There are new or revised accounting standards and interpretations in issue that are not yet effective. These include the following standards and interpretations that are material to the business of the entity and which may have an impact on future financial statements, or those for which the impact has not as yet been assessed. These standards were not early adopted.

IFRS 9 Financial instruments
IFRS 9 will be adopted by the Group for the first time for its financial reporting period ending 30 June 2019. The standard will be applied retrospectively, subject to transitional provisions.

IFRS 9 addresses the following and will replace the relevant sections of IAS 39:

Under IFRS 9 there are two options in respect of the classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value.

Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.

IFRS 9 has retained in general the requirements of IAS 39 for financial liabilities, except for the following two aspects:

IFRS 9 incorporates the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment of embedded derivatives.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9.

IFRS 15 Revenue from contracts with customers

This standard replaces IAS 11 Construction contracts, IAS 18 Revenue, IFRIC 13 Customer loyalty programmes, IFRIC 15 Agreements for the construction of real estate, IFRIC 18 Transfer of assets from customers and SIC-31 Revenue — barter of transactions involving advertising services.

IFRS 15 will be adopted by the Group for the first time for its financial reporting period ending 30 June 2019.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

IFRS 11 Joint arrangements (amendments)

The objective was to add new guidance to IFRS 11 Joint Arrangements on the accounting for the acquisition of an interest in a joint operation that constitutes a business. The IASB decided that acquirers of such interests shall apply all of the principles on business combinations accounting in IFRS 3 Business Combinations, and other IFRSs, that do not conflict with the guidance in IFRS 11 and disclose the information that is required in those IFRSs in relation to business combinations. IFRS 11 (amended) will be adopted by the Group for the first time for its financial reporting period ending 30 June 2017.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 11 (amended).

Sale or contribution of assets between an investor and its associate or joint venture (amendment to IFRS 10 and IAS 28)

The objective of the project is to address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. It will be adopted by the Group for the first time for its financial reporting period ending 30 June 2018.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 11 (amended).

Disclosure initiative (amendments to IAS 1)

The International Accounting Standards Board (IASB) has published “Disclosure Initiative (Amendments to IAS 1)”. The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports. It will be adopted by the Group for the first time for its financial reporting period ending 30 June 2017.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IAS 1 (amended).

IFRS 5 Changes in methods of disposal

Assets (or disposal groups) are generally disposed of either through sale or through distribution to owners. The amendment to IFRS 5 clarifies that changing from one of these disposal methods to the other should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is therefore no interruption of the application of the requirements in IFRS 5.

The amendment also clarifies that changing the disposal method does not change the date of classification. For example, on 1 September 2016, Entity A determines that it will distribute shares of its subsidiary to its shareholders. Consequently, it classifies the subsidiary as “held for distribution”. However, on 1 December 2016, Entity A decides that, instead of distributing the shares to its shareholders, it will sell the subsidiary. Therefore, it changes the disposal method to “held for sale”. The date of classification continues to be 1 September 2016 and the sale must be completed within one year from that date.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 5 (amended).

IFRS 7 Financial instruments: disclosures

In December 2011, IFRS 7 was amended to add guidance on offsetting of financial assets and financial liabilities. In the effective date and transition for that amendment, paragraph 44R of IFRS 7 states that “[A]n entity shall apply those amendments for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods.” The interim disclosure standard, IAS 34, does not reflect this requirement, however, and it is not clear whether those disclosures are required in the condensed interim financial report.

The amendment removes the phrase “and interim periods within those annual periods” from paragraph 44R, clarifying that these IFRS 7 disclosures are not required in the condensed interim financial report. However, the IASB noted that IAS 34 requires an entity to disclose “[…] an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period”. Therefore, if the IFRS 7 disclosures provide a significant update to the information reported in the most recent annual report, the IASB would expect the disclosures to be included in the entity’s condensed interim financial report.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 7 (amended).

IAS 34 Interim financial reporting: disclosure of information “elsewhere in the interim financial report”

IAS 34 requires entities to disclose information in the notes to the interim financial statements “if not disclosed elsewhere in the interim financial report”. However, it is unclear what the IASB means by “elsewhere in the interim financial report”.

The amendment states that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report (e.g. in the management commentary or risk report).

The IASB specified that the other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. If users do not have access to the other information in this manner, then the interim financial report is incomplete.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IAS 34 (amended).