{"id":347,"date":"2010-11-04T01:32:30","date_gmt":"2010-11-03T17:32:30","guid":{"rendered":"http:\/\/www.nbc.com.my\/blog\/?p=347"},"modified":"2011-12-12T01:15:42","modified_gmt":"2011-12-11T17:15:42","slug":"hektar-reit-q3-2010-results-accounting-review","status":"publish","type":"post","link":"https:\/\/www.nbc.com.my\/blog\/hektar-reit-q3-2010-results-accounting-review\/","title":{"rendered":"Hektar REIT Q3 2010 results & accounting review"},"content":{"rendered":"

Hektar Real Estate Investment Trust (REIT) announced its Q3 2010 results<\/a> yesterday, with some extracts below:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Cumulative 3 Quarters<\/strong><\/td>\n\n

Current<\/strong><\/p>\n<\/td>\n

\n

Preceding<\/strong><\/p>\n<\/td>\n

\n

\u00a0<\/strong><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/strong><\/p>\n<\/td>\n

\n

YTD<\/strong><\/p>\n<\/td>\n

\n

YTD<\/strong><\/p>\n<\/td>\n

\n

\u00a0<\/strong><\/p>\n<\/td>\n<\/tr>\n

\n

\u00a0<\/strong><\/p>\n<\/td>\n

\n

30.9.2010<\/strong><\/p>\n<\/td>\n

\n

30.9.2009<\/strong><\/p>\n<\/td>\n

\n

%<\/strong><\/p>\n<\/td>\n<\/tr>\n

Revenue<\/strong><\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Actual revenue – billing<\/td>\n\n

66,837,205<\/p>\n<\/td>\n

\n

66,182,580<\/p>\n<\/td>\n

\n

1.0%<\/p>\n<\/td>\n<\/tr>\n

Revenue under FRS 117<\/td>\n\n

1,059,693<\/p>\n<\/td>\n

\n

–<\/p>\n<\/td>\n

\n

100%<\/p>\n<\/td>\n<\/tr>\n

Total revenue<\/td>\n\n

67,896,898 <\/strong><\/p>\n<\/td>\n

\n

66,182,580<\/strong><\/p>\n<\/td>\n

\n

2.6%<\/p>\n<\/td>\n<\/tr>\n

<\/td>\n<\/td>\n<\/td>\n\u00a0<\/td>\n<\/tr>\n
Trade receivables<\/strong><\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
– actual billing<\/td>\n\n

706,621<\/p>\n<\/td>\n

\n

375,188<\/p>\n<\/td>\n

\n

88.3%<\/p>\n<\/td>\n<\/tr>\n

– receivables under FRS 117<\/td>\n\n

1,059,693<\/p>\n<\/td>\n

\n

–<\/p>\n<\/td>\n

\n

100%<\/p>\n<\/td>\n<\/tr>\n

Total trade receivables<\/td>\n\n

1,766,314 <\/strong><\/p>\n<\/td>\n

\n

375,188<\/strong><\/p>\n<\/td>\n

\n

370.8%<\/p>\n<\/td>\n<\/tr>\n

<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Liabilities<\/strong><\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Deferred income (FRS 139)<\/td>\n\n

1,058,904 <\/strong><\/p>\n<\/td>\n

\n

–<\/strong><\/p>\n<\/td>\n

<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
\n

Cash flow from operating activities<\/strong><\/p>\n<\/td>\n

<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Adjustment for non-cash item<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
– Revenue under FRS 117<\/td>\n\n

(1,059,693)<\/p>\n<\/td>\n

\n

–<\/p>\n<\/td>\n

<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n<\/colgroup>\n\n\n\n\n
<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
.<\/div>\n

Accounting policies disclosed in the Quarterly Report (QR):<\/strong><\/p>\n

A13 RENTAL INCOME FROM TENANCIES (FRS 117: Leases)<\/p>\n

Rental income receivable under tenancy agreements is recognized on a straight-line basis over the term of the lease. Meanwhile, gross turnover rental is recognized as income in the accounting period on a receipt basis.<\/p><\/blockquote>\n

A14 DEFERRED INCOME (FRS 139: Financial Instruments: Recognition and Measurement)<\/p>\n

Deferred income relates to the difference between consideration received for tenancy deposits and its fair value using the discounted cash flow method.<\/p><\/blockquote>\n\n\n\n\n\n
Net present value at discounted cash flow<\/td>\n\n

20,349,972<\/p>\n<\/td>\n<\/tr>\n

Deferred income (FRS 139)<\/td>\n\n

1,058,904<\/p>\n<\/td>\n<\/tr>\n

Gross tenancy deposits received<\/strong><\/td>\n\n

21,408,876<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

.<\/div>\n

The deferred income will be unwind and recognised as income in the income statement over the lease term.<\/p>\n

Review of performance<\/strong><\/p>\n

Actual revenue was higher than the preceding year\u2019s corresponding period by 2.6%. This is due to overall improvement in rentals and car park income in 2010. In addition, the application of FRS117 commencing 1 January 2010 also contributed to the higher revenue in 2010<\/strong>.<\/p>\n

What are the new accounting policies or treatment noted?<\/strong><\/p>\n

The QR disclosed that the application of FRS 117 commencing 1 Jan 2010 has resulted in additional revenue of RM1,059,693, may due to the effect of difference on rental income receivable under tenancy agreements which is recognised on a straight-line basis over the term of lease, against the gross turnover rental recognised on a receipt basis.<\/p>\n

\"rental\"<\/a><\/p>\n

What is this about? <\/strong>It is more likely this is the effect of recognition of rental income which is chargable to tenants on a step-up basis over the lease term or there might be rent free period given at the initial lease term.<\/p>\n

Why the effect only shown up in 2010 under FRS 117?<\/strong> Are amendments to FRS 117 which take effect from 1 Jan 2010 affect the recognition of rental income? Take a look at the MASB Amendments to FRS 117.<\/a> In fact, no amendments were made as to the recognition of rental income.<\/p>\n

In order to promote greater compliance to the approved accounting standards, Hektar REIT may take the opportunity under FRS 117 amendments to recognise the rental straight-line effect this year as revenue and trade receivables.<\/p>\n

Is this change constitutes a change in accounting policy which may require retrospective application?<\/strong> It may not be the case. It may just a change in presentation and disclosure. Or no retrospective application is necessary may due to its immaterial effect.<\/p>\n\n\n\n\n\n\n\n\n\n
<\/td>\n\n

After<\/strong><\/p>\n<\/td>\n

\n

Before<\/strong><\/p>\n<\/td>\n<\/tr>\n

Market value of investment properties, say<\/td>\n\n

10,000,000<\/p>\n<\/td>\n

\n

10,000,000<\/p>\n<\/td>\n<\/tr>\n

(already take into consideration of rent free period and step up rental)<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Less: effect of straight-line rental income recognised as trade receivable<\/td>\n\n

(1,059,693)<\/p>\n<\/td>\n

\n

–<\/p>\n<\/td>\n<\/tr>\n

<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
Fair value of investment properties carried in the book<\/td>\n\n

8,940,307 <\/strong><\/p>\n<\/td>\n

\n

10,000,000<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n
<\/td>\n\n

30.9.2010<\/strong><\/p>\n<\/td>\n

\n

30.9.2009<\/strong><\/p>\n<\/td>\n<\/tr>\n

Investment Properties<\/td>\n\n

715,972,878<\/p>\n<\/td>\n

\n

720,000,000<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

.<\/div>\n

The reduction in investment properties may have been effected the amount of trade receivables as a separate current asset item.<\/p>\n","protected":false},"excerpt":{"rendered":"

Hektar Real Estate Investment Trust (REIT) announced its Q3 2010 results yesterday, with some extracts below: Cumulative 3 Quarters Current Preceding \u00a0 \u00a0 YTD YTD \u00a0 \u00a0 30.9.2010 30.9.2009 % Revenue Actual revenue – billing 66,837,205 66,182,580 1.0% Revenue under FRS 117 1,059,693 – 100% Total revenue 67,896,898 66,182,580 2.6% \u00a0<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80],"tags":[9,20],"class_list":["post-347","post","type-post","status-publish","format-standard","hentry","category-financial-reporting","tag-accounting","tag-reit"],"_links":{"self":[{"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/posts\/347"}],"collection":[{"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/comments?post=347"}],"version-history":[{"count":0,"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/posts\/347\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/media?parent=347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/categories?post=347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nbc.com.my\/blog\/wp-json\/wp\/v2\/tags?post=347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}