Final Results -12-

Company has the power to govern the financial and operating policies of an 
investee entity so as to obtain benefits from its activities. In assessing 
control, potential voting rights that are presently exercisable are taken into 
account. 
 
 
The results of subsidiaries acquired or disposed of during the year are included 
in the consolidated income statement from the effective date of acquisition or 
up to the effective date of disposal, as appropriate. 
 
 
Where necessary, adjustments are made to the financial statements of 
subsidiaries to bring the accounting policies used into line with those used by 
the Group. 
 
 
All intra-group transactions, balances, income and expenses are eliminated on 
consolidation. 
 
 
The Bulgarian Property Developments Group includes Bulgarian Property 
Developments Plc, its 100% Bulgarian subsidiary, Bulgarian Property Developments 
EOOD and its 100% subsidiaries: Bulgarian Property Developments 1 EOOD, 
Bulgarian Property Developments 2 EOOD, Bulgarian Property Developments 4 EOOD, 
Bulgarian Property Developments 5 EOOD, Sandanski Retail Centre OOD, Trakia 
Retail Centre OOD and Bulgarian Property Developments Bansko EOOD. 
 
 
Business combinations and goodwill 
On acquisition, the assets, liabilities and contingent liabilities of 
subsidiaries are measured at their fair values at the date of acquisition. Any 
excess of cost of acquisition over the fair values of the identifiable net 
assets acquired is recognised as goodwill. Any deficiency of the cost of 
acquisition below the fair values of the identifiable net assets acquired (i.e. 
discount on acquisition) is credited to the income statement in the period of 
acquisition. Goodwill arising on consolidation is recognised as an asset and 
reviewed for impairment at least annually. Any impairment is recognised 
immediately in the income statement and is not subsequently reversed. 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
1.ACCOUNTING POLICIES (continued) 
 
 
Joint ventures 
Joint ventures are included using the equity method in accordance with IAS 31. 
However, within the consolidated balance sheet and consolidated income 
statement, additional information is shown regarding the Group's share of the 
assets which it jointly controls and the share of the liabilities for which it 
is jointly responsible, together with the Group's share of the income and 
expenses of the jointly controlled entity. Joint ventures are those entities 
over whose activities the Group has joint control, established by contractual 
agreement and requiring unanimous consent of shareholders for strategic, 
financial and operating decisions. 
 
 
Associates 
Associates are those entities over which the Group has significant influence, 
but not control, over the financial and operating policies. Associates are 
accounted for under the equity method. 
 
 
Revenue recognition 
Revenue is measured at the fair value of the consideration received or 
receivable and represents amounts receivable for goods and services provided in 
the normal course of business, net of discounts, VAT and other sales related 
taxes. Sales of property are recognised when title has passed. 
 
 
Revenue arising from the provision of services is recognised when and to the 
extent that the Group obtains the right to consideration in exchange for the 
performance of its contractual obligations as follows: rental income in respect 
of properties rented out under operating leases is recognised on a straight line 
basis over the term of the lease. Lease incentives granted are recognised as an 
integral part of the total rental income over the term of the lease. 
 
 
The Group derives operating income from one country, Bulgaria. 
 
 
Functional and presentation currency 
These consolidated financial statements are presented in Sterling, the 
functional currency of the parent company, Bulgarian Property Developments Plc, 
being the preferred reporting currency of its shareholders. The accounts of 
subsidiaries are prepared in Bulgarian Lev (Lev) (their functional currency). 
All financial information presented in Sterling has been rounded to the nearest 
thousand. Transactions in foreign currencies are translated into Sterling at the 
foreign exchange rate prevailing on the date of the transaction. The assets and 
liabilities in the financial statements of foreign subsidiaries are translated 
at the rate of exchange ruling at the balance sheet date. Income and expenses 
are translated at average rates provided there is no significant change in 
month. The exchange differences arising from the retranslation of the opening 
net investment in subsidiaries are taken directly to the "Reserve for exchange 
differences on translation of foreign operations." 
 
 
Taxation 
The tax expense represents the sum of the tax currently payable and any deferred 
tax. The tax currently payable is based on the taxable profit for the period. 
Taxable profit differs from net profit as reported in the income statement 
because it excludes items of income or expense that are taxable or deductible in 
other years and it further excludes items that are never taxable or deductible. 
The Company's liability for current tax is calculated using tax rates that have 
been enacted or substantially enacted by the balance sheet date. 
 
 
Deferred tax is the tax expected to be payable or recoverable on differences 
between the carrying amounts of assets and liabilities in the financial 
statements and the corresponding tax bases used in the computation of taxable 
profit, and is accounted for using the balance sheet liability method. 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
1ACCOUNTING POLICIES (continued) 
 
 
Taxation (continued) 
Deferred tax liabilities are generally recognized for all taxable temporary 
differences and deferred tax assets are recognised to the extent that it is 
probable that taxable profits will be available against which deductible 
temporary differences can be utilized. Such assets and liabilities are not 
recognized if the temporary difference arises from goodwill or from the initial 
recognition (other than a business combination) of other assets and liabilities 
in a transaction that affects neither the taxable profit nor the accounting 
profit. 
 
 
Deferred tax liabilities are recognized for taxable temporary differences 
arising on investments in subsidiaries, except where the Group is able to 
control the reversal of the temporary difference and it is probable that the 
temporary difference will not reverse in the foreseeable future. 
 
 
The carrying amount of deferred tax assets is reviewed at each balance sheet 
date and reduced to the extent that it is no longer probable that sufficient 
taxable profits will be available to allow all or part of the asset to be 
recovered. 
 
 
Deferred tax is calculated at the tax rates that are expected to apply in the 
period when the liability is settled or the asset realized. Deferred tax is 
charged or credited to profit or loss, except when it relates to items charged 
or credited directly to equity, in which case the deferred tax is also dealt 
with in equity. 
 
 
Deferred tax assets and liabilities are offset when there is a legally 
enforceable right to set off current tax assets against current tax liabilities 
and when they relate to income taxes levied by the same taxation authority and 
the Group intends to settle its current assets and liabilities on a net basis. 
 
 
Investment in subsidiary 
Investments in subsidiary undertakings are shown at cost, less any provision for 
impairment. 
 
 
Share based payments 
In accordance with IFRS 2, share based payments are reflected within these 
accounts at fair value with reference to the services provided by the entities 
to which they are granted. These options are classified as equity shares to be 
issued until they are exercised, at which point they become called up share 
capital. 
 
 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
1ACCOUNTING POLICIES (continued) 
 
 
Investment properties 
The group reviewed its property portfolio and strategy in December 2007. As a 
result of this review, all properties were reclassified from inventory to 
investment properties. 
 
 
Investment properties are those properties that are held by the Group or in 
joint ventures either to earn rental income or for capital appreciation or both. 
Investment properties are measured at cost plus associated transaction costs as 
permitted by IAS 40. Properties are treated as acquired at the point when the 
Group assumes title to ownership on completion and as disposed when the title is 
transferred to the buyer. Additions to investment properties consist of costs of 
a capital nature. 
 
 
When the Group redevelops an investment property for continued use as a 
development property, the property remains a development property and is 
accounted for as such. 
 
 
The cost of newly constructed buildings is depreciated at 4% per annum on a 
straight line basis and for those buildings that are currently in use, but 
planned to be demolished in future when construction work starts, are 
depreciated at 6.67% per annum on a straight line basis. Land is not 
depreciated. However, as the decision to reclassify the properties to investment 
properties was made in December 2007, no depreciation was charged in the 
financial statements in the six months to 31 December 2007. 
 
 
A professional valuation is made as of each reporting date, of each investment 
property. Where the professional valuation shows a value lower than cost, the 
carrying value of that property within the accounts is reduced to the valuation. 
No account is taken of any fair value gains in investment properties as a result 
of professional valuations. 
 
 
Investment property under construction 
Properties that are built with the intention to be used as investment properties 
in the future are classified as investment properties under construction, and