AL-SALAM REIT ANNUAL REPORT 2019

AL-SALĀM REIT • 125 ANNUAL REPORT 2019 For The Financial Year Ended 31 December 2019 (Cont’d) 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 benefits will flow 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 financial year. For the financial year ended 31 December 2019, 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 financial statements and historical sales trends. The Group and the Fund only recognise percentage rent revenue to the extent financial 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 significant risk of causing a material adjustment to the carrying amount of assets and liabilities of the Fund within the next financial 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 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. 5. GROSS RENTAL INCOME The Group The Fund 2019 2018 2019 2018 RM RM RM RM Rental income: Base rental income 75,452,508 65,044,487 75,452,508 65,044,487 Unbilled rental income 4,214,668 853,005 4,214,668 853,005 Service charges 5,666,040 5,887,300 5,666,040 5,887,300 Percentage rent 3,208,897 3,623,260 3,208,897 3,623,260 88,542,113 75,408,052 88,542,113 75,408,052 6. OTHER INCOME The Group The Fund 2019 2018 2019 2018 RM RM RM RM Timing of revenue recognition: At a point in time Parking income 2,802,648 3,225,731 2,802,648 3,225,731 Event and advertising income 3,567,623 3,516,965 3,567,623 3,516,965 6,370,271 6,742,696 6,370,271 6,742,696 Notes To The Financial Statements