Al-`Aqar Healthcare REIT Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS 28. ADOPTION OF MFRS 9 AND MFRS 15 Adoption of MFRS 15 With the adoption of MFRS 15, revenue is recognised by reference to each distinct performance obligation in the contract with customer. Transaction price is allocated to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract. Depending on the substance of the contract, revenue is recognised when the performance obligation is satisfied, which may be at a point in time or over time. There were no material financial impacts to the statements of financial position and the statements of comprehensive income of the Group and of the Fund arising from the adoption of MFRS 15. Adoption of MFRS 9 The accounting policies were changed to reflect the application of MFRS 9 from the beginning of the first MFRS reporting period. MFRS 9 replaces the provisions of MFRS 139 that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. MFRS 9 also significantly amends other standards dealing with financial instruments such as MFRS 7 ‘Financial Instruments: Disclosures’. The cumulative effects of the changes are recognised in the statements of financial position as at the beginning of the first MFRS reporting period, which is on 1 January 2018. The nature of adjustments made to the statements of financial position of the Group and of the Fund as at 1 January 2018 in respect of items within the scope of MFRS 9 are described as follows: (a) Classification and measurement of financial assets Until 31 December 2017, financial assets were classified in the following categories: financial assets at fair value through profit or loss (“FVTPL”), loans and receivables, and available-for-sale (“AFS”) financial assets. Note 3.6 sets out the details of accounting policies for classification and measurement of financial instruments under MFRS 139. From 1 January 2018, the Group and the Fund adopted the following MFRS 9 classification approach to all types of financial assets: • Investments in debt instruments: There are 3 subsequent measurement categories: amortised cost, fair value with changes either recognised through other comprehensive income (“FVTOCI”) or through profit or loss (“FVTPL”). • Investments in equity instruments: These instruments are always measured at fair value with changes in fair value presented in profit or loss unless the Group and the Fund have made an irrevocable choice to present changes in fair value in other comprehensive income for investments that are not held for trading. • Embedded derivatives in financial asset host contracts: The Group and the Fund apply the classification and measurement of financial assets to the entire hybrid instrument for financial assets with embedded derivatives. • The new accounting policies for classification and measurement of financial instruments under MFRS 9 are set out in Note 3.6. Al-`Aqar Healthcare REIT • Annual Report 2018 150 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (CONTINUED)