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TMI BlogDisclosure of financial information in offer document for REITsX X X X Extracts X X X X X X X X Extracts X X X X ..... rk and under the drop down Circulars . Yours faithfully, Richa G. Agarwal Deputy General Manager Investment Management Department Tel No.022-2644 9596 Email id - [email protected] Annexure - A Financial information to be disclosed in offer document (A) Financial Information of REIT: The financial information, to be disclosed in the offer document, shall comply with the following: 1. Period of financial information to be disclosed: 1.1. The offer document shall contain financial information for a period of last three completed financial years immediately preceding the date of offer document. 1.2. If the closing date of the last completed financial year falls more than six months before the date of offer document, then the REIT shall also disclose interim financial information, in addition to the three year financial information referred in paragraph 1.1.above. The said interim financial information shall be not more than six months old from the date of offer document. 2. Nature of financial information 2.1. REIT shall disclose the financial information for the previous three financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esulted in modified opinion(s) or modification(s) to the opinion in the auditor s report. Modified opinion(s), where quantification is not possible and which have not been adjusted, shall be highlighted along with the management comments. If the impact of above adjustments/rectifications is not considered ascertainable, then a statement to that effect shall be given by the auditors. (b) Material amounts relating to adjustments for prior period errors/items (as discussed in Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors ) shall be identified and adjusted in arriving at the profits of the years to which they relate. (c) Where there has been a change in accounting policy, the profits or losses/incomes or expenditures of the earlier years (required to be disclosed in the offer document) and of the year in which the change in the accounting policy has taken place shall be recomputed to reflect what the profits or losses/incomes or expenditures of those years would have been if a uniform accounting policy was followed in each of these years. (d) If any accounting policy followed in past was not in accordance with applicable laws and/or accounting st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of latest financial information disclosed in the offer document, shall be disclosed. (b) If there are any material changes in the commitments from the aforementioned date of latest financial information to the date of the offer document, the details of such changes shall be disclosed in the offer document. 4.5. Related party transactions: (a) For the related parties as defined in the REIT regulations, the REIT shall provide relevant disclosures of all related party transactions in compliance with the requirements of Ind AS 24 - Related Party Disclosures and the REIT Regulations. (b) Further, the following additional disclosures related to Related parties and Related party transactions, wherever applicable, shall also be included: i. Details of related party and its relationship with REIT; ii. Nature of the transaction; iii. Value of the transaction; iv. In case of any related party transaction involving acquisition or disposal of an real estate asset / property, the following additional information shall be provided Summary of valuation report(s); Material conditions or obligations in relation to the transaction; Rate of interest, if external f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts in Company Prospectuses , issued by ICAI, to the extent applicable. (c) In particular, the reports of the auditors on the financial statements of the various REIT assets (whether prepared in accordance with the framework applicable to such REIT assets or the framework applicable to the REIT) for the respective periods covered in the period of three years and the interim period, if any, will have to be taken into consideration and the same shall be relied upon by the auditor giving the final report. For the audit procedures to be followed in such case, the auditor shall be guided by the procedures stated in the Standard on Auditing (SA) 600, Using the Work of another Auditor , to the extent applicable. Further, the fact that the financial statements audited by other auditors have been relied upon shall be disclosed in the audit report. (d) As a part of the audit report, the auditor shall state whether: i. he has obtained all information and explanations which, to the best of his knowledge and belief, were necessary for the purpose of his audit; ii. the Balance Sheet and the Statement of Profit and loss/Income and Expenditure are in agreement with the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C) Management Discussion and Analysis of REIT s operations 1. REIT shall prepare and disclose Management Discussion and Analysis (MDA) (by the Manager), based on the financial statements. A comparison shall be provided for the most recent financial information with financial information of previous two years. 2. MDA shall, inter-alia contain the following : Overview of the business of the REIT A summary of the financial information containing significant items of income and expenditure. Factors that may affect results of the operations, key risks and mitigating factors Quality of earnings and revenue streams Significant developments subsequent to the last financial year: A statement by the Manager whether in their opinion there have arisen any circumstances since the date of the last financial statements as disclosed in the offer document and which materially and adversely affect or is likely to affect the business or profitability of the REIT, or the value of its assets, or its ability to pay its liabilities within the next twelve months. Procedure for dealing with and approval of related party transactions Related party transaction(s) involvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if the concerned entity is required to follow Companies (Accounting Standards) Rules, 2006 during the entire period of last three years, then the three year financial information of such entity shall be prepared in accordance with Companies (Accounting Standards) Rules, 2006. Similarly, if the concerned entity is required to follow Companies (Indian Accounting Standards) Rules, 2015 during the entire period of last three years, then the three year financial information shall be prepared in accordance with Companies (Indian Accounting Standards) Rules, 2015. 2. In case the Manager and/or Sponsor(s) has/have done a transition from Companies (Accounting Standards) Rules, 2006 to Companies (Indian Accounting Standards) Rules, 2015 at any time during the period of last three years, then the financial information for the last three years shall be disclosed on the following basis: a. If the concerned entity is following or is required to follow Companies (Indian Accounting Standards) Rules, 2015 for the latest two years (for the latest three years including comparatives of the first year of adoption) out of last three completed years, then the financial information for all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the Holdco/SPV/REIT. 3. REIT may take guidance from the following framework for defining and calculating NDCFs at the Holdco/SPV level and at the REIT level : (I.) Calculation of Net Distributable Cash Flows at the SPV level: Description Amount Profit after tax as per Statement of profit and loss/income and expenditure (standalone) (A) Xx Add: Depreciation and amortisation as per Statement of profit and loss/income and expenditure Xx Add/less: Loss/gain on sale of Real estate assets xx Add: Proceeds from sale of Real estate assets adjusted for the following: related debts settled or due to be settled from sale proceeds directly attributable transaction costs proceeds reinvested or planned to be reinvested as per para 18 (7) (a) of the REIT Regulations xx Add: Proceeds from sale of Real estate assets not distributed pursuant to an earlier plan to re-invest, if such proceeds are not intended to be invested subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an asset or of a liability recognised in Statement of profit and loss/income and expenditure on measurement of the asset or the liability at fair value, interest cost as per effective interest rate method, deferred tax, lease rents recognised on a straight line basis, etc. xx Less: Repayment of external debt (principal) / redeemable preference shares / debentures, etc., if deemed necessary by the Manager xx Total Adjustments (B) xx Net Distributable Cash Flows (C) = (A+B) xx (G) Principles for preparation of combined financial statements: 1. For preparation of Combined Financial Statements, as has been indicated in Paragraph 2.1 (b) under Section (A) above, REIT shall follow the following principles : 1.1. Period for which combined financial statements shall be disclosed When the REIT has not been in existence for some portion or the entire portion of the reporting period of three years and interim period, if any, then the financial information must be provided through combined financial statements, showing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial information is considered for a period lesser than three years and the additional interim period, if any, then such fact shall be clearly disclosed in the offer document, along with all pertinent details. vi. Assumptions made in preparation of the Combined Financial Statements shall be disclosed in Basis of Preparation of such statements. vii. The basis of preparation shall also explain the principles of combination and elimination of transactions amongst entities that are included in the Combined Financial Statements. 2. In addition to the principles listed at paragraph 1 above, the REIT/Manager, while preparing the Combined Financial Statements of the REIT, shall also be guided by the requirements laid down in the Guidance Note on Combined and Carve-Out Financial Statements and any other pertinent guidance/directions issued by ICAI in this context. (H) Minimum Disclosures for key financial statements: 1. For the financial statements listed at Paragraph 3.3 of Section (A) above, the line items shall, at minimum, include the following: 1.1. Line items for Balance Sheet: I. Assets a) Property, plant and equipment; b) Capital work-in-progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom: a) Profit or loss; b) Other comprehensive income; c) Aggregate amount of investments by unit holders in REIT, and dividends / other distributions by REIT to unit holders 1.4. Line items for the Statement of Cash flows / Receipts and Payments The statement of Cash flows / Receipts and Payments, shall be prepared in accordance with the requirements of Ind AS 7- Statement of Cash Flows . 1.5. Line items for Statement of Net Assets at Fair Value The line items for the Statement of Net Assets at Fair Value, shall, at minimum, include the following: S.No. Particulars Book Value Fair Value A. Assets xxxx xxxx B. Liabilities xxxx (as reflected in the balance sheet) C. Net Assets (A-B) xxxx xxxx D. No. of Units xxxx xxxx E. NAV (C/D) xxxx xxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X
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