Asset Buyout Partners Annual Report 2019

enacted at the balance sheet date. Management periodically evalu- ates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are recognized for all taxable temporary differences, except when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. 2.9. Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognized when the Group has a present legal or constructive obligation as a result of past events, if it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by consider- ing the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. 2.10. Revenue recognition The Group enters into lease agreements as a lessor with respect to its investment properties. Lease contracts where a significant propor- tion of the risks and benefits of ownership remain with the group are classified as operating leases.. Rental income arising from operating leases is accounted for on a straight-lined basis over the lease term. Variable lease payments is recognized when it arises. Fees paid in relation to new lease agreements are included in the cost of the investment property and are amortized over the life of the lease agreement. Initial direct costs incurred in obtaining an operating lease are recognized as an expense over the lease term on the same basis as the lease income. Tenant lease incentives are recognized as a reduction of rental revenue on a straight-lined basis over the lease term. Amounts received from tenants to terminate leases or to compensate for dilapidations are recognized in the statement of profit and loss when the right to receive them arises. Other income is recognized as it is earned. 2.11. Property related expenses and other expenses Expenses directly related to the operation of existing properties are recognized as property related expenses. Other expenses are included as administrative expenses. 2.12. Interest income Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument. Interest income on impaired loans and receivables is recognized using the original effective interest rate. 2.13. Dividend distribution Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends is approved by the Company’s shareholders. Asset Buyout Partners | Annual Report 2019 24