The financial statements of the company are presented separately from the consolidated financial statements and were approved by the directors on 2 September 2016, the same date as these financial statements. The separate financial statements are available for review and inspection at the registered office of the company.

Fair value adjustments do not affect the determination of distributable earnings, but have an effect on net asset value per share to the extent that such adjustments are made to the carrying values of assets and liabilities. All accounting policies applied in the preparation of these financial statements are consistent with those applied in the consolidated financial statements for the year ended 30 June 2015. Various new accounting standards, or revisions to current accounting standards, have been issued with effective dates applicable to future financial statements. Refer to note 1.25 – Standards issued but not yet effective.

The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

The group financial statements incorporate the assets, liabilities, income, expenses and cash flows of the group. The results of subsidiaries acquired or disposed of during the year are included in the group financial statements from the date of acquisition or up to the date of disposal, as applicable. All intra-group transactions, unrealised profits and balances between group entities are eliminated on consolidation.

The group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been recognised in the acquiree’s annual financial statements prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of (a) fair value of consideration transferred, (b) the recognised amount of any non-controlling interest in the acquiree and (c) acquisition date fair value of any existing equity interest in the acquiree, over the acquisition date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on bargain purchase) is recognised in profit or loss immediately.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

For the purposes of impairment testing, goodwill is allocated to each of the group’s cash-generating units that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.

When a group entity transacts with its joint operation, profits and losses resulting from the transactions with the joint operation are recognised in the group’s financial statements only to the extent of interests in the joint operation that are not related to the group.

The group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRS applicable to the particular assets, liabilities, revenues and expenses.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement.

The results, assets and liabilities of associates and joint ventures are incorporated in the financial statements using the equity method of accounting, except when the investment is classified as held-for-sale, in which case it is accounted for in accordance with IFRS 5.

Under the equity method, the investment is initially recorded at cost and thereafter the carrying value is adjusted to recognise the investor’s share of the post-acquisition profits or losses of the investee after the date of acquisition, distributions received and any adjustments that are required. The profits or losses are recognised in the statement of profit or loss and other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture.

If the interest that the company has in the joint venture provides the company with a contractual right to receive dividends, the investment is accounted for as a financial instrument and will not be equity accounted. Refer to note 1.12 — Financial instruments.

When the reporting period of the investor is different to that of the associate or joint venture, the associate or joint venture prepares for the use of the investor, financial statements as at the same date as the financial statements of the investor.

Where a group entity transacts with an associate or joint venture of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant associate or joint venture.

Subsequent expenditure is capitalised when it is probable that future economic benefits will flow to the group and its cost can be reliably measured. All other expenditure is recognised as an expense in the period in which it is incurred. Gains and losses on the disposal of building appurtenances and tenant installations are recognised in profit or loss and are calculated as the difference between the price and the carrying value of the item sold.

Investment property is initially recognised at cost including transaction costs. Cost includes initial costs, costs incurred subsequently to extend or refurbish investment property as well as the cost of any development rights.

Investment property is subsequently measured at fair value as determined on a semi-annual basis by an independent registered valuer. The valuations are done on an open-market basis and valuers use the discounted cash flow method. Gains or losses arising from changes in fair value, after deducting the straight-line lease income adjustment, are included in net profit or loss for the period in which they arise. These gains or losses are transferred to non-distributable reserves in the statement of changes in equity.

In instances when investment property is sold, but not yet transferred to the purchaser at year-end, the fair value is determined as the sale price.

Realised gains or losses arising on the disposal of investment properties are recognised in profit or loss for the year and transferred to non-distributable reserves in the statement of changes in equity.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the property. Any gain or loss arising on derecognition of the property is included in profit or loss in the period in which the property is derecognised. The gain or loss is calculated as the difference between the net disposal proceeds and the carrying amount of the asset.

Investment property classified as held-for-sale is measured in accordance with IAS 40 Investment Property at fair value with gains and losses on subsequent measurement being recognised in profit or loss. Disposal groups and non-current assets held-for-sale are presented separately from other assets and liabilities on the statement of financial position.

Financial assets and financial liabilities are recognised on the statement of financial position when the group becomes party to the contractual provisions of the instrument. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are initially measured at fair value. All transaction costs relating to financial instruments measured at fair value through profit or loss are immediately expensed.

Derecognition of financial instruments
The group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the group is recognised as a separate asset or liability.

The group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Offset
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, when the group has an enforceable right to set off the recognised amounts, and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.

Subsequent measurement
Subsequent to initial recognition, these instruments are measured as follows:

Financial assets

Financial liabilities

Derivative instruments

The entity uses derivative financial instruments to hedge its exposure to interest rate risk arising from its financing activities. Derivative instruments have been designated by the group as instruments held for trading and are accounted for at fair value through profit or loss. Gains or losses are transferred to non-distributable reserves in the statement of changes in equity.

The group holds interest rate swap instruments. The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to terminate the swap at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

Non-financial assets
The carrying amounts of the group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount, and is recognised in profit or loss. Goodwill is tested for impairment annually.

An impairment loss is reversed, with the exception of goodwill, if there has been a change in the estimates used to determine the recoverable amount and there is an indication that the impairment loss no longer exists.

An impairment loss is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised.

External costs directly attributable to the issue of new shares are shown as a deduction from equity.

Statement of financial position presentation
On purchase, the cost of the shares acquired is deducted from equity. Subsequently, any gain or loss on the sale or cancellation of the company’s own equity instruments is recognised directly in equity.

Statement of comprehensive income presentation
Both distributions and unrealised losses on own shares are eliminated from group profit for the year.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on translation are recognised in profit or loss.

Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the group’s presentation currency (Rand) at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rand at the dates of the transactions (an average rate is used).

Foreign currency translation reserve
Foreign currency differences on translation of the financial position and results of a foreign operation into Rand are recognised in other comprehensive income, in the foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit and loss as part of the profit or loss on disposal.

Short-term employee benefits are measured on an undiscounted basis. The accrual for employee entitlements to salaries, bonuses and annual leave represents the amount which the group has a present legal or constructive obligation to pay as a result of the employees’ services provided up to the reporting date.

Long-term benefits
Equity-settled share-based employee remuneration
The group operates equity-settled share-based conditional unit plans (CUP) for its employees.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions.

All share-based remuneration is ultimately recognised as an expense in profit or loss, with a corresponding increase in equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of shares expected to vest.All share-based remuneration is ultimately recognised as an expense in profit or loss, with a corresponding increase in equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of shares expected to vest.

Post-employment benefits
Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which the group pays contributions to a separate entity and has no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The contributions are recognised as an employee benefit expense when the related services have been rendered.

Turnover rentals (variable rentals based on the turnover achieved by a tenant) are included in revenue when the amounts can be reliably measured.

Interest received
Interest earned on cash invested with financial institutions is recognised on an accrual basis using the effective interest method.

Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use.

The amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on funds specifically borrowed in respect of the qualifying asset. Investment income earned on the temporary investment of borrowings pending their expenditure on qualifying assets is deducted from the borrowing cost capitalised. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

On a primary basis, the operations are organised into the following business segments: Shopping centres, value centres, standalone offices, investments in sub-Saharan Africa (excluding South Africa) and investments in South-Eastern Europe.

Information on the key estimations and uncertainties that have the most significant effect on amounts recognised is set out below:

Investment property valuations
The valuation of investment properties requires judgement in the estimation of future cash flows, appropriate discount rates and capitalisation rates. Refer to note 2 — Investment property.

Interests in co-ownerships
In terms of the co-ownership agreements for Canal Walk and The Glen, material capital expenditure requires mutual consent of the co-owners. The majority of capital expenditure (subject to an annual increase in terms of an inflation adjusted formula) undertaken is material, and accordingly these centres are not considered to be solely controlled by Hyprop.

The interests in these centres are therefore treated as joint operations.

Business combination versus asset acquisition
During the year the group acquired interests in Ikeja City Mall in Lagos, Nigeria as well as Delta City Malls in Belgrade, Serbia and Podgorica, Montenegro. Management assessed the acquisitions during the year and concluded that the acquisitions are business combinations in terms of IFRS 3 Business combinations and were therefore accounted for in terms of that standard. In the opinion of management, the properties acquired constitute businesses as defined in terms of IFRS 3 Business combinations.

Control over an investee
Hystead Limited (Hystead) is the investment holding company for Hyprop’s investments in South-Eastern Europe. Hyprop has a 60% equity interest in Hystead.

Management assessed the acquisition of its interest in Hystead and whether it has control over Hystead. It was concluded that the company has joint control over Hystead.

Investments in joint ventures — equity-accounted investments versus financial instruments
Management assessed the acquisition of Hystead during the year to determine whether it should form part of joint ventures and be equity accounted or whether the contractual right to receive dividends should be accounted for as a financial asset.

It was concluded that by virtue of the contractual right to receive dividends the investment in Hystead should be accounted for as a financial asset.

Management anticipate that all of the pronouncements will be adopted in the group’s accounting policies for the first period beginning after the effective date of the pronouncements. Information on new standards, amendments and interpretations that are expected to be relevant to the group’s financial statements or those for which the impact has not yet been assessed, is provided. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the group’s financial statements namely: