Explanatory notes
Real estate companies
and other diversifications
General
The combined balance sheet and profit and loss account consist of the
annual account of the majority participations in real estate companies and
other diversifications.
The general principle used to value real estate in operation is purchase or
construction costs less annual depreciation. Depreciation is calculated
based on these costs and taking into account the estimated useful life of
the property. Properties, including those acquired through the purchase of
foreclosed properties, which we intend to sell in the near future, are
valued at the costs of purchase or construction less the proceeds realized.
Real estate in operation is not valued above the market value. Gain from
the sale of real estate is calculated as the difference between net proceeds
and book value.
Real estate under development is valued at the costs incurred in
connection with these projects up to the moment of sale or lease.
However, real estate in development is not valued above the market value.
Capitalized costs include interest on the amount invested at the average
interest rate for mortgage loans. Interest, however, is not capitalized
should this cause the book value of the project in question to exceed
market value.
Proceeds from sales are accounted for in the year in which a project is
completed, or if pre-sold, in the year in which part of the project is
completed.
Furniture and fittings and other fixed assets are valued at purchase costs,
less the depreciation calculated in proportion to the estimated useful life.
Purchase sums received are deducted from the real estate in development.
Works in progress of the construction firm are included under 'Real estate
under development' less any installment payments received. Valuation is
at cost price plus 5% for indirect costs. Forseeable losses are deducted
from the valuation in the year in which they were incurred. The result is
accounted for in the year in which the work is completed.
(Minority) participations are accounted for in accordance with the equity
method based on the principles of valuation as applied by FGH.
Receivables, including accounts receivable from participations, are valued
at nominal value less such provisions as are considered necessary.
All amounts denominated in foreign currency are translated into Dutch
guilders at the closing rate. Currency value differences with regard to the
participations are attributed directly to the shareholders' equity of the
parent company.
Other currency value differences are accounted for in the result.
The maintenance provision is intended to produce a better allocation of
the costs of periodic maintenance of real estate in operation.
A provision is made to cover the vacancy risk in the period between
completion and first leasing of development projects. This provision is
calculated annually on the basis of the balance sheet value of the projects
concerned.
