2 Basis of preparation

Vesteda Residential Fund FGR (the Fund) is not a legal entity. These financial statements present the consolidated financial information of the Fund and its affiliated companies (together referred to as the Vesteda Companies).

Management considered whether the Vesteda Companies represent a reporting entity. Although no legal parent company exists, management believes that the Vesteda Companies meet the definition of a reporting entity under IFRS, taking into account the discussions held by IFRIC and the IASB in prior years and the ED Conceptual Framework for Financial Reporting as issued by the IASB in May 2015. The ED states that if a reporting entity is not a legal entity, the boundary of the reporting entity needs to be set in such a way that the financial statements: (a) provide the relevant financial information needed by the existing and potential investors, lenders and other creditors who rely on the financial statements; and (b) faithfully represent the economic activities of the entity.

The Vesteda Companies represent a defined area of economic activities whose financial information provides relevant information to users of financial statements. Furthermore, the economic activities can be objectively distinguished from those of other entities and from the economic environment in which the Vesteda Companies operate.

The ED of May 2015 discusses the distinction between consolidated and combined financial statements. Management is of the opinion that this distinction is not relevant for the users of the financial statements of the Vesteda Companies and as such uses the term ‘consolidated’ financial statements.

As a result management believes that this basis of preparation results in a true and fair presentation of the Vesteda Companies’ financial position, financial performance and cash flows, and that the consolidated financial statements comply in all material aspects with International Financial Reporting Standards as endorsed by the European Union and Part 9 of Book 2 of the Dutch Civil Code and the Financial Supervision Act.

The consolidated financial statements of the Vesteda Companies have been prepared on a historical cost basis, except for investment property, property, plant and equipment, investment property under construction and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in euro and all amounts are rounded to the nearest million, except where otherwise indicated.

As a result of the license obtained from the AFM, Vesteda needs to comply with the Alternative Investment Fund Managers Directive (AIFMD). As a consequence, Vesteda needs to adhere to the requirements of Part 9 of Book 2 of the Dutch Civil Code. Based on these requirements Vesteda needs to apply IFRS as adopted by the European Union as a basis of preparation for the 2016 consolidated financial statements.

In addition, based on the requirements of Part 9 of Book 2 of the Dutch Civil Code, Vesteda prepared 2016 company financial statements for Vesteda Residential Fund FGR. These financial statements will be reported to the DNB and are available for other users upon request.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Fund and its affiliated companies as at 31 December 2016. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Vesteda Companies obtain control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

The following entities are included in the consolidated financial statements:

  • Vesteda Residential Fund FGR, Amsterdam - Parent entity

  • Vesteda Investment Management BV, Amsterdam - 100%

  • Stichting Dutch Residential Fund I, Amsterdam - 100%

  • Custodian Vesteda Fund I BV, Amsterdam - 100%

  • Custodian Vesteda Fund II BV, Amsterdam - 100%

  • Custodian Vesteda Fund III BV, Amsterdam - 100%

  • Custodian Vesteda Fund IV BV, Amsterdam - 100%

  • Custodian Vesteda Fund V BV, Amsterdam - 100%

  • Vesteda Finance BV, Amsterdam - 100%

  • Vesteda Project Development BV, Amsterdam - 100%

In 2016, HOG Heerlen Onroerend Goed BV (100%) and Gordiaan Vastgoed BV (100%) have been liquidated.

All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Subsidiaries are entities (directly or indirectly) controlled by the Fund. Control exists when the Fund is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Fund controls an investee if, and only if, the Fund has all of the following:

  • Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

  • Exposure, or rights, to variable returns from its involvement with the investee

  • The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights results in control. When the Fund has less than a majority of the voting, or similar, rights of an investee, it considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

  • The contractual arrangement(s) with the other vote holders of the investee

  • Rights arising from other contractual arrangements

  • The Group’s voting rights and potential voting rights

The relevant activities are those which significantly affect the subsidiary’s returns. The ability to approve the operating and capital budget of a subsidiary and the ability to appoint key management personnel are decisions that demonstrate that the Fund has the existing rights to direct the relevant activities of a subsidiary.

The Fund re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Fund obtains control over the subsidiary and ceases when the Fund loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the Fund gains control until the date the Fund ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss.

Any investment retained is recognized at fair value.