DES GB2015 Englisch

SIGNIFICANT ACCOUNTING POLICIES AND VALUATION METHODS REVENUE AND EXPENSE RECOGNITION Revenue and other operating income are recognised once the relevant service has been rendered or once the risk has passed to the customer. Operating expenses are recognised once the service has been utilised or at the time when they are booked through profit and loss. Interest income and expense are accrued. INTANGIBLE ASSETS Intangible assets relate exclusively to software purchased by Deutsche EuroShop AG. Additions are measured at cost. These are amortised at 20% using the straight-line method over the expected useful life of five years. The method of depreciation and the depreciation period are re- viewed annually at the end of each financial year. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is reported at cost, less scheduled de- preciation and, where applicable, unscheduled write-downs (impair- ment charges). Operating and office equipment comprises company cars, office equip- ment, tenant fixtures, fittings and technical equipment belonging to Deutsche EuroShop AG, and is depreciated using the straight-line meth- od over three to 13 years. The method of depreciation and the depre- ciation period are reviewed annually at the end of each financial year. INVESTMENT PROPERTIES Under IAS 40, investment property must initially be measured at cost at the date of acquisition. Property that is under construction and in- tended to be used as investment property following its completion also falls under the scope of IAS 40. Property held as a financial investment can be recognised either at amortised cost (cost model) or using the fair-value model. Subsequently, all properties must be measured at their fair value and the annual net changes recognised in income under measurement gains/losses (recurring fair value measurement). Investment prop- erty is property held for the long term to earn rental income or capital gains. Under IAS 40, investment property measured using the fair value model is no longer depreciated. The fair values of the properties in the period under review as at 31 December 2015 were determined by appraisers from Jones Lang LaSalle GmbH (JLL). As in previous years, the discounted cashflow method (DCF) was used. This method entails the calculation of the pres- ent value of future cash flows from the property in question as at the valuation date. In addition, the net income from the property in ques- tion is determined over a detailed planning period of (usually) ten years and a discount rate applied. A residual value is forecast for the end of the ten-year detailed planning phase by capitalising the stabilised cash flows of the last budgeted year using an interest rate (the capitalisation interest rate). In a second step, the residual value is discounted back to the measurement date. JLL applied the equated yield model in order to arrive at the discount and capitalisation interest rates. The capitalisation interest rate was derived for each property individually from initial rates of return from comparable transactions. At the same time, such determinants of val- ue as inflation and changes in rent and costs were implicitly taken into account in the capitalisation interest rate. The risk profile specific to each property was also adjusted by reference to the relevant individ- ual indicators. Examples of such indicators include the quality of the property’s location and position, market trends and developments in the competitive environment. JLL likewise derived the discount inter- est rates from comparable transactions, albeit making adjustments for projected increases in rent and costs, since these had been explicitly shown in the relevant cash flow. JLL applied the same methods in val- uing domestic and foreign real properties. In the preceding year, the fair values of the properties in the period under review had been determined by the Feri EuroRating Services AG and GfK GeoMarketing GmbH appraisal team using the discounted cash flow (DCF) method. Over the forecast period, rents were assumed to increase on average over the long term at 1.14% (2014: 1.70%). On average, management and administration costs at 10.7% (2014: 11.0%) were deducted from the forecast rents. This resulted in an average net income of 89.3% (2014: 89.0%). Actual management and administrative costs amount- ed to 9.6% of rental income in the year under review (2014: 9.5%). At an average capitalisation rate of 5.33%, the average discount rate was 6.11% (2014: 6.44%). The appraisal showed that, for the 2015 financial year, the real prop- erty portfolio had an initial yield before deduction of transaction costs of 5.46% compared with the previous year’s 5.87% (-0.41%), and an initial rate of return net of transaction costs (net initial yield) of 5.13%, the figure for the previous year having been 5.53% (-0.40%). The net initial yields thus largely reflect the trend on the retail property mar- ket in 2015: 152 Deutsche EuroShop AG Annual Report 2015 CONSOLIDATED FINANCIAL STATEMENTS

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