Explanatory notes
General principles of
accounting and valuation
The combined balance sheet and profit
and loss account comprise the annual
accounts of our majority interests both in
real estate companies and in other
diversifications.
The general valuation standard for real
estate in operation is: cost of acquisition
or construction less annual depreciation.
The depreciation is done on the basis of
these costs, thereby taking into account
the estimated useful life.
As a result of the sale of the property,
the difference between the proceed and
the book value is accounted for. Except
for some special projects, the result of the
sale thus computed is credited to the
replacement reserve.
The tax debt burdening this replacement
reserve is, just like the deferred tax
liability resulting from valuation
differences, accounted for under
‘provision for contingent tax obligations’.
The computation is based on the
cash value of future tax obligations. The
real estate in course of development
is valued at the costs, including
interest, incurred for the relevant
projects up to the moment of letting
or sale. The interest is computed
on the amount invested at the average
interest rate for mortgage loans. The
valuation per project does not exceed the
market value of the property.
The result of the sale is accounted for in
the year in which a project is completed,
or - in case the result of the sale is
certain - in the year in which part of the
project is completed.
The other profits and losses are generally
accounted for in the year to which they
relate.
As from the financial year 1974, a
provision for maintenance is built up to
which is added every year, to the debit of
the profit and loss account, an amount per
project computed on the basis of the costs
and the frequency of the periodical
maintenance, while the expenses made in
a specific year are charged to this
provision.
The method followed implies that at any
moment is calculated per real estate
complex and per kind of maintenance
which amount should be available in the
provision.
Apart from the normal yearly payments,
in a few years such amounts will, to the
debit of the profit and loss account, be
added to the provision that it is supple
mented to the required amount. An
amount of f600,000.- was added on this
score, to the debit of the profit and loss
account for 1974.
Apart from this, the influence of the
change in method on the result for 1974
was small.
As from the financial year 1974, a
provision is made for the risk of un
occupiedness in the development sector.
The size of this provision is determined
every year in proportion to the balance
sheet value of the real estate in course of
development.
The corporation income tax included in
the profit and loss account is computed
on the balance of this account, thereby
taking into account the exempted
components of the profit.
The securities positions are calculated at
the market prices as at the balance sheet
date or at the acquisition price, which
ever is the lower.
Receivables are valued at their nominal
values less the provisions deemed
necessary.
The dividend of non-consolidated invest
ments is accounted for in the year of
distribution.
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