4 Accounting Policies
Recognition and measurement, as well as the explanatory information and notes, are generally based on the same recognition and measurement methods that were used to prepare the consolidated financial statements for the 2017 fiscal year. Due to the takeover of the BUWOG Group, the provisions set out in IFRS 15 relating to revenue recognition are also to apply to Vonovia as part of the development business in 2018.
The development business related to the acquisition refers to subsidized or independently financed condominiums that are under construction or have already been completed. These properties are not held with the aim of generating rental income or achieving increases in value within the meaning of IAS 40, but rather are developed and constructed to be sold at a later date, meaning that they are reported in the consolidated balance sheet as real estate inventories in accordance with IAS 2.
Due to IFRS 15, revenue is to be recorded either over time or at a point in time depending on the transfer of control to the customer. In cases of development properties for which control, within the meaning of IFRS 15.35(c), already passes to the customer at the time at which the certified purchase agreement is concluded, revenue is to be recognized as of this point in time based on the degree of completion of the construction project. Reporting of the contract assets that fall within the scope of IFRS 15 occurs on a net basis with the corresponding advance payments received under trade receivables.
In the context of the initial application of IFRS 9, Vonovia exercised an irrevocable option, whenever financial investments are categorized as equity instruments, to state future changes to the fair value under other comprehensive income in equity. Gains or losses recognized in other comprehensive income are never reclassified from equity to the income statement on their disposal.
The application of IFRS 9 will result in a change in the calculation processes for the risk classification of receivables from property letting, for updates to historical credit losses and for calculating the need for impairments taking forward-looking information into account. This change has not had any material impact in terms of the amount.
In addition, Vonovia has opted to continue to apply the hedge accounting provisions set out in IAS 39 as opposed to the provisions of IFRS 9; in particular, the hedge documentation and effectiveness range remains unchanged between 80% and 125% (corridor).
There were no seasonal or economic influences that had an impact on Vonovia’s business activities in the reporting period.