Guidelines

How should a manager apply the interim and annual reporting requirements when four detailed quarterly or two semi-annual reports are provided to investors?

The INREV reporting guidelines focus on the content rather than the format of the reports to investors.
Many managers prepare three or four quarterly interim reports or one semi-annual report along with a more complete annual report, including commentary on the last quarter/half year. Although these interim reports are expected to be in an abridged form, they can also contain all the disclosures set out in the annual reporting requirements at the manager’s discretion. The reporting guidelines reflect the minimum requirements with respect to the content of the report to investors.
In some circumstances, managers provide to investors four quarterly reports or two semi-annual reports with annual financial statements provided separately. These reports contain all the disclosures set out in both the interim and annual reporting requirements and, therefore, comply with such requirements. In such case, the annual report accompanying the financial statements may only include a summary of the information provided in the detailed interim reports.

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.

How should acquisition costs be treated under INREV in case of merger of funds?

In case of merger of funds with substantial impact on vehicle documentation, strategy and investor base, the unamortised portion of historical acquisition costs from historical structures should be taken over and capitalised and amortised over five years along with the new setup costs arising from the merger.

How should performance fee be recognised for INREV NAV calculation purposes?

For the purposes of calculating INREV NAV, in case the performance hurdle is exceeded, at reporting date, based on the calculation methodology stated in the vehicle documentation, the performance fee should be recognised in full. Care should be taken to assess uncertainty surrounding estimates of income.