IFRS 16 requires reclassifying liabilities resulting from future lease payments of land use rights from the property value to financial liabilities. Does this change trigger a change in the computation of the INREV GAV as determined for the INREV expense ratio purposes?
The INREV GAV calculated for the INREV expense ratio purposes should be presented net of future lease payments of land use rights, similarly to what has been done prior to IFRS 16 endorsement. This will align treatment and presentation of these lease payment under INREV with current treatment and presentation by external valuers in the valuation reports.
IFRS 16 requires accounting for lease payments as interest expenses and repayment of lease obligation. Shall we include these lease payments as part of the numerator of the INREV REER?
The INREV REER should include the lease payments incurred during the reported period. The lease payments aim to indemnify the landlord for the maintenance of the building. In case the vehicle would own the building, such costs would be typically included in the REER. Nevertheless, such payments would typically have an immaterial effect on the INREV REER and on any key investment decisions.