Asset Buyout Partners Annual Report 2019

2.4. Classification of assets and debt Current assets and short-term debt expected to be settled within 12 months, and other items that are included in the Group’s normal operating cycle are classified as current. Strategic investments are classified as fixed assets. First year instalments of long-term debt are classified as short-term. 2.5. Investment property Measurement at recognition Property held with the purpose of achieving rental income, increase in value, or both are classified as investment property. Investment property is initially recognized at cost including transaction costs. Transaction costs includes legal fees and due diligence costs. Investment property is normally acquired through the purchase of shares in a company that owns the property. When shares are acquired there is no change in the tax base of the property, resulting in lower tax deductions for depreciations for the acquirer. The purchase price in these transactions normally includes a tax compen- sation. The effect of this is that the property acquired will initially be recorded at a cost lower than fair value. Measurement after recognition After initial recognition, the investment property is measured at fair value, which reflects market conditions at the reporting date. Gains or losses from changes in fair value are presented in profit and loss when they arise, under the line item “Fair value adjustments investment property”. Subsequent capital expenditure relating to investment property is included in the carrying amount if it is probable that they will result in future economic benefits for the investment property and the costs can be measured reliably. Expenses relating to operations and maintenance of the investment property are charged to the income statement during the financial period in which they are incurred. Tax compensation and transaction costs relating to the acquisition of an investment property (single purpose entities) are recognized in the income statement as part of the value adjustment on investment property in the period after the acquisition. Derecognition Investment properties are derecognized when sold or permanently out of operation and no future economic benefit is expected. All gains or losses related to sales or disposals are presented in the income statement in the same year as the disposal. Gains or losses from the disposal of investment property is the difference between net selling price and the carrying amount of the asset. Gains or losses are included in the line item “Fair value adjustments invest- ment property”. 2.6. Financial instruments Recognitions Financial instruments (financial assets and financial liabilities) are recognized when the Group becomes party to the contractual provisions of the instrument. Financial assets - Classification and measurement The Group classifies its financial assets in one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows: Fair value through profit or loss This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value (see “Financial liabilities” section for out-of-money derivatives classified as liabilities). They are carried in the statement of financial position at fair value with changes in fair value recognized in the consolidated statement of comprehensive income in the finance income or expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss. Amortized cost These assets arise principally from the provision of goods and services to customers (“e.g.” trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment. Impairment provisions for expected losses on current and non-cur- rent trade receivables are recognized based on the simplified approach within IFRS 9. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognized within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Material financial assets for the Group Trade receivables Trade receivables are amounts due from customers under the lease contracts for investment properties. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Cash and cash equivalents Cash and cash equivalents consist of bank deposits. In the consol- idated balance sheet, bank overdrafts are shown as borrowings in current liabilities. Derecognition Financial assets are derecognized when the right to receive cash flows from investments has expired or been transferred and the Group has substantially transferred all risks and rewards of ownership. Financial liabilities - Classification and measurement Financial liabilities are classified, at initial recognition, as financial Asset Buyout Partners | Annual Report 2019 22