The combined balance sheet and profit and loss account comprise the
annual account of majority participations in real estate companies
and other diversifications.
The general valuation principle for real estate in operation is purchase
or construction costs less depreciation. Depreciation is based on cost
and taking into account the estimated useful life of the property.
Certain properties, including mortgaged properties with defaulted
loans, which properties were purchased by us, which are to be sold in
the near future are valued on the basis of purchase or construction
costs less income realized.
The valuation of real estate in operation does not exceed its 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 with the
projects until the moment of sale or lease. The valuation of real estate
under development does not exceed the market value. Capitalized
costs include interest on the amounts invested at the average rate for
mortgage loans. However interest is not capitalized if this would
cause the book value to exceed market value.
The proceeds from sales are accounted for in the year in which a
project is completed, or if presold, the proceeds are pro-rated
according to the portion completed in that year. Purchase sums
received are deducted from the real estate in development. Works in
progress of the construction firm is included under 'Real estate under
development' less any instalments received. Valuation is at cost plus
5% for indirect costs. Foreseeable 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) interests are valued at intrinsic value according to the
principles of valuation as applied by FGH.
Receivables, including accounts receivable from participations are
valued at face value less such provisions as are considered necessary.
All assets and liabilities denominated in foreign currencies are
translated into Dutch guilders at rates prevailing at the balance sheet
date. Currency exchange gains and losses throughout the Group are
transferred to a central parent company account.
The resulting net balance of currency exchange gains and losses is
recorded there as a change in stockholders' equity.
The maintenance provision is intended to produce a better allocation
of the costs of periodic maintenance. The provision is increased
annually by an amount, chargeable to the results, calculated on each
property based on costs and frequency of periodic maintenance.
Expenses incurred during the year are charged to this provision.
The method used means that the amount which should be available
for each real estate complex and for each particular kind of
maintenance can be calculated at any time.
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