AL-SALAM REIT ANNUAL REPORT 2017

AL-SALĀM REIT ANNUAL REPORT 2017 141 Financial Liabilities and Equity Instruments Classification as debt or equity Debt and equity instruments are classified as either financial liability or as equity in accordance with the substance of the contractual arrangements and the definition of a financial liability and equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Fund are recorded at the proceeds received, net of direct issue costs. Unitholders’ units are recorded at the proceeds received, net of direct attributable transactions costs and are classified as equity. Distributions on Unitholders’ units are recognised in equity in the period in which they are declared. Financial liabilities Financial liabilities are classified as other financial liabilities. The Fund’s other financial liabilities include trade payables, other payables and accrued expenses and borrowings. Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the EIR method, with financing costs recognised on an effective yield basis. The EIR method is a method of calculating the amortised cost of a financial liability and of allocating financing costs over the relevant period. The EIR is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or a shorter period, to the net carrying amount on initial recognition. Derecognition of financial liabilities The Fund derecognises financial liabilities when, and only when, the Fund’s obligation is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss. Cash and Cash Equivalents The Fund adopts the indirect method in the preparation of the statement of cash flows. Cash and cash equivalents comprise cash and bank balances, term deposits and other short-term, highly liquid investments that are readily convertible into cash with insignificant risk of changes in value, against which bank NOTES TO THE FINANCIAL STATEMENTS - CONT’D