MRM - 2018 Registration document

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General information on the issuer and its capital

Consolidated financial statements for the financial year ended 31 December 2018

Note 5

Notes to the statement of comprehensive income

5.1 Gross rental revenues

Accounting principles

Recognition of income IAS 17 – Leases specifies how lease income from operating leases, and direct initial costs incurred by the lessor, should be recognised. Lease income “should be recognised over the lease term on a straight-line basis, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished”.

At present, the leases signed by the Group match the definition of operating leases as defined by IAS 17.

Applying SIC-15 Operating Leases—Incentives has the effect of staggering the financial impact of all the provisions of the lease contract over the lease term. This is the case for rent-free periods, stepped rents and key money. For leases that took effect before 1 January 2010, the staggering is over the full term of the lease. Since 1 January 2010, the staggering is over the firm period of the lease.

Key money Key money payable to the lessor is classified as additional rent.

Key money forms part of the net amount exchanged between the lessor and lessee under a lease.

As such, the accounting periods during which this net amount is recorded must not be affected by the terms of the agreement and payment dates. These charges must be staggered over the first firm period of the lease.

Cancellation penalty Tenants may be required to pay cancellation penalties if they cancel their lease before its contract expires. Where applicable, the portion of these penalties similar to rental income is spread over the remaining term of the lease and booked under “Rental revenues”.

Compensation for eviction The lessor may be required to compensate the tenant for eviction if the former cancels the lease.

• replacement of the tenant: if the compensation for eviction modifies or maintains the asset’s yield (increase in rent and thus in the asset’s value), according to amendments to IAS 16 this expense can be capitalised into the cost of the asset subject to appraisers confirming the increase in value. Otherwise, the expense is recorded as such; • property renovation requiring the departure of the existing tenants: if the compensation for eviction is made in the context of heavy refurbishing or reconstruction requiring the tenants’prior departure, it is considered a preliminary expense included as an additional component after the renovation works.

Gross rental revenues consist of rents and similar income (e.g. parking revenues).

31/12/2018

31/12/2017

(in thousands of euros)

Retail properties Office properties

8,746

9,011 2,183

785

TOTAL GROSS RENTAL REVENUES

9,531

11,194

Of the €9,531 thousand in gross rental revenues for 2018, variable rents totalled €90 thousand.

M.R.M. 2018 REGISTRATION DOCUMENT

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