NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2023 2. Basis of preparation and material accounting policies (Cont’d) 2.4 Material accounting policies (Cont’d) (k) Revenue The Group’s and the Fund’s key sources of income include: (i) Rental income The Group and the Fund earn revenue from acting as a lessor in operating leases which do not transfer substantially all of the risks and rewards incidental to ownership of an investment property. Rental income arising from operating leases on investment property is accounted for on a straightline basis over the lease term and is included in revenue in the statement of profit or loss due to its operating nature, except for contingent rental income which is recognised when it arises. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income. (ii) Investment revenue Investment revenue, which comprise income earned from Islamic fixed deposits with licensed banks and profit-sharing on advances, are recognised using the effective profit method. Profit income is calculated by applying the effective profit rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For creditimpaired financial assets the effective profit rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance). (l) Income distribution Income distributions are recognised as a liability when they are approved by Trustee and the board of directors of the Manager. Interim distributions are deducted from unitholders’ funds when they are paid. Income distribution to unitholders that are declared after the reporting period are not recognised as a liability at the end of the reporting period. (m) Taxation (i) Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in OCI or in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. AL-`AQAR HEALTHCARE REIT ANNUAL REPORT 2023 194 FINANCIAL STATEMENTS 1 2 3 4 5
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