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EC World Real Estate Investment Trust ANNUAL REPORT 2016
NOTES TO THE
Financial Statements
For the Financial Year ended 31 December 2016
28. New or revised accounting standards and interpretations (continued)
FRS 109 Financial instruments
(effective for annual periods beginning on or after 1 January 2018)
The complete version of FRS 109 replaces most of the guidance in FRS 39. FRS 109 retains the mixed measurement
model and establishes three primarymeasurement categories for financial assets: amortised cost, fair value through
Other Comprehensive Income (OCI) and fair value through Profit or Loss. The basis of classification depends on
the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at
inception to present changes in fair value in OCI.
Accordingly, the Group does not expect the new guidance to have a significant impact on the classification of its
financial assets.
For financial liabilities there were no changes to classification and measurement except for the recognition
of changes in own credit risk in OCI, for liabilities designed at fair value through profit or loss. There will be no
impact on the Group’s accounting for financial liabilities as the Group does not have any such liabilities.
FRS 109 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It
requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’
to be the same as the one Management actually use for risk management purposes.
There is now a new expected credit losses model that replaces the incurred loss impairment model used in FRS
39. It applies to financial assets classified at amortised cost, debt instruments measured at fair value through OCI,
contract assets under FRS 115 Revenue from contracts with customers, lease receivables, loan commitments and
certain financial guarantee contracts.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are
expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly
in the year of the adoption of the new standard.
The Group is currently assessing the impact of FRS 109 and plans to adopt the new standard on the required
effective date.
FRS 116 Leases
(effective for annual periods beginning on or after 1 January 2019)
FRS 116 will result in almost all leases being recognised on the Statements of Financial Position, as the distinction
between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased
item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
The standard will affect primarily the accounting for the lessee. The accounting for lessor will not change
significantly.
29. Events occurring after Statement of Financial Position date
The manager announced a distribution of 1.463 cents per unit for the period from 1 October 2016 to 31 December 2016.
30. Authorisation of financial statements
The financial statements were authorised for issue by the Manager and the Trustee on 24 March 2017.