MRM - 2019 Universal Registration Document

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General information on the issuer and its share capital

Consolidated financial statements for the financial year ended 31 December 2019

Note 5 Notes to the statement of comprehensive income

5.1 Gross rental income

Accounting principles

Recognition of income IFRS 15 - Revenue from Contracts with Customers - specifies how rental revenues from leases, and direct initial costs incurred by the lessor, should be recognised. The rental revenues are recorded under income on a straight-line basis for the entire duration of the lease term. Applying IFRS 15 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.

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 tenant 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 the 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 refurbishment 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 refurbishment works.

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

12/31/2019

12/31/2018

(in thousands of euros)

Retail properties Office properties

9,123

8,746

-

785

TOTAL GROSS RENTAL INCOME

9,123

9,531

Of the €9,123,000 in gross rental income for 2019, variable rents totalled €43,000.

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M.R.M. 2019 UNIVERSAL REGISTRATION DOCUMENT