AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 131 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s and the Fund’s accounting policies, which are described in Note 3, the Manager is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may difer from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision afects only that period or in the period of the revision and future periods if the revision afects both current and future periods. 4.1 Critical Judgements in Applying the Fund’s Accounting Policies In the process of applying the Group’s and the Fund’s accounting policies, the Manager is of the opinion that there are no instances of application of judgement which are expected to have a signiicant efect on the amounts recognised in the inancial statements other than disclosed below: (a) Recognition of percentage rent In accordance with the accounting policies of the Group and of the Fund, as stated in Note 3, revenue is recognised to the extent that it is probable that the economic beneits will low to the Fund and the revenue can be reliably measured. Certain tenancy agreements between the Fund and its tenants contain clauses as to percentage rent whereby rent received and/ or receivable by the Fund is the higher of (i) the base rent as determined in the tenancy agreement and (ii) a percentage of sales revenue earned by the tenant during the inancial year. For the inancial year ended 31 December 2018, the Manager assessed the appropriateness of recognising revenue from percentage rent against the accounting policies of the Group and of the Fund by considering the availability of tenants’ audited inancial statements and historical sales trends. The Group and the Fund only recognise percentage rent revenue to the extent inancial information is available for the Manager to make a reliable estimate. 4.2 Key Sources of Estimation Uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a signiicant risk of causing a material adjustment to the carrying amount of assets and liabilities of the Fund within the next inancial year are discussed below: (a) Fair value of investment properties The fair values of the Fund’s investment properties have been arrived at on the basis of valuation carried out by Messrs. Cheston International (KL) Sdn Bhd, Messrs. VPC Alliance (Kajang) Sdn Bhd and Messrs. IM Global Property Consultant Sdn Bhd, independent valuers not related to the Group and the Fund, in accordance with Malaysia Valuation Standards issued by the Board of Valuers, Appraisers and Estate Agents, Malaysia. The fair values were determined based on capitalisation of net income method (“investment method”) as the primary valuation method with comparison and cost methodologies as a secondary check. In estimating the fair values of the investment properties, the highest and best use of the investment properties is their current use. The valuers have considered the results of the above methods in their valuation and applied professional judgment in the determination of the fair values of the Fund’s investment properties. Further details are disclosed in Note 11.