Final Results -13-

are stated at cost until the construction is completed. Subsequently they are 
reclassified and reported as investment properties. The Company has adopted the 
cost model for subsequent recognition of investment properties. 
 
 
All costs directly associated with the purchase and construction of a property 
and all subsequent capital expenditures for the development are capitalised. 
 
 
Borrowing costs 
Borrowing costs related to the acquisition and construction of investment 
properties are expensed in the period when incurred. 
 
 
Inventories 
In cases where land and buildings are acquired for resale, they are classified 
as inventories. 
 
 
Inventories are valued at the lower of cost and net realisable value. Cost 
comprises direct materials and, where applicable, direct costs that have been 
incurred bringing the inventory to its present location and condition. Such 
costs include all statutory and professional fees relating to the acquisition of 
a property, obtaining planning consents, legal fees in relation to the granting 
of new leases together with the costs of construction and redevelopment. 
 
 
Net realisable value represents the estimated selling price less all estimated 
costs of completion and costs to be incurred in marketing, selling and 
distribution. Land being held for resale or developed for that purpose may from 
time to time be acquired with existing tenants. Rent from such existing tenants 
is incidental to the main purpose of the acquisition of such land and buildings, 
which is to develop it for sale. 
 
 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
1ACCOUNTING POLICIES (continued) 
 
 
Plant and equipment 
Depreciation is provided on all tangible fixed assets, at rates calculated to 
write off the cost, less estimated residual values, of each asset evenly on a 
straight line basis over its expected useful life: 
+------------------------------------------+---------------------------------------------+ 
| Fixtures and fittings                    | 4 years                                     | 
+------------------------------------------+---------------------------------------------+ 
| Vehicles, plant and equipment            | 3-4 years                                   | 
+------------------------------------------+---------------------------------------------+ 
 
 
Critical accounting judgments and key sources of estimation uncertainty 
The preparation of financial statements in conformity with generally accepted 
accounting practice requires management to make estimates and judgments that 
affect reported amounts of assets and liabilities as well as the disclosure of 
contingent assets and liabilities at the balance sheet date and the reported 
amounts of revenues and expenses during the reporting period. 
 
 
Estimates and judgments are normally evaluated and are based on historical 
experience and other factors, including expectations of future events that are 
believed to be reasonable under the circumstances. 
 
 
Key sources of estimation uncertainty relate to: 
 
 
- Bad debt provisions 
The trade and other receivables balances recorded in the Group's balance sheet 
comprise a relatively small number of small balances. A full line by line review 
of trade receivables is carried out at the end of each month. Whilst every 
attempt is made to ensure that the bad debt provisions are as accurate as 
possible, there remains a risk that the provisions do not match the level of 
debts which ultimately prove to be uncollectible. 
 
 
- Impairment of investment properties 
Management recognises that the impairment of investment properties requires 
professional judgment and is a potential source of estimation uncertainty. 
However, the Group has a policy in respect of impairment of investment 
properties as stated above. 
 
 
Financial instruments 
(i) Non-derivative financial instruments 
Financial assets and financial liabilities are recognised on the balance sheet 
when the Group becomes a party to the contractual provisions of the instrument. 
Equity instruments issued by the Group are recorded at the proceeds received, 
net of direct issue costs. 
 
 
Trade and other receivables are initially recognised at fair value, and are 
subsequently measured at amortised cost using the effective interest method. A 
provision is established when there is objective evidence that the Group will 
not be able to collect all amounts due. The amount of any provision is 
recognised in the income statement. 
 
 
Cash and cash equivalents comprise cash held by the Group and short-term bank 
deposits with an original maturity of three months or less. 
 
 
Trade and other payables are initially recognised at fair value, and are 
subsequently measured at amortised cost, using the effective interest rate 
method. 
 
 
(ii)  Derivative financial instruments 
During 2007 and 2008 the Group did not hold derivative financial instruments to 
hedge foreign currency, interest rate risk exposures, or cash flows. 
 
 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 
for the year ended 31 December 2008 
 
 
1ACCOUNTING POLICIES (continued) 
 
 
Financial risk management 
The Group uses a limited number of financial instruments, comprising cash and 
short-term deposits, and various items such as trade receivables and payables, 
which arise directly from operations. The Group does not trade in financial 
instruments. 
 
 
Financial risk factors 
The Group's activities expose it to a variety of financial risks: market risk 
(including currency risk and interest rate risk), credit risk, liquidity risk 
and cash flow risk. The Group's overall risk management programme focuses on the 
unpredictability of financial markets and seeks to minimize potential adverse 
effects on the Group's financial performance. 
 
 
+----------+-----------------+ 
| a)       | Foreign         | 
|          | exchange        | 
|          | risk            | 
+----------+-----------------+ 
|          | The             | 
|          | Group           | 
|          | operates        | 
|          | internationally | 
|          | and is exposed  | 
|          | to foreign      | 
|          | exchange risk   | 
|          | arising from    | 
|          | various         | 
|          | currency        | 
|          | exposures,      | 
|          | primarily with  | 
|          | respect to      | 
|          | Sterling, the   | 
|          | Euro and the    | 
|          | Bulgarian Lev.  | 
|          | Foreign         | 
|          | exchange risk   | 
|          | arises from     | 
|          | future          | 
|          | commercial      | 
|          | transactions,   | 
|          | recognised      | 
|          | assets and      | 
|          | liabilities and | 
|          | net investments | 
|          | in foreign      | 
|          | operations.     | 
|          | Details of the  | 
|          | Group's policy  | 
|          | in respect of   | 
|          | this risk are   | 
|          | set out in note | 
|          | 21.             | 
+----------+-----------------+ 
|          |                 | 
+----------+-----------------+ 
|          | Foreign         | 
|          | exchange        | 
|          | risk            | 
|          | arises          | 
|          | when            | 
|          | future          | 
|          | commercial      | 
|          | transactions    | 
|          | or              | 
|          | recognised      | 
|          | assets or       | 
|          | liabilities     | 
|          | are             | 
|          | denominated     | 
|          | in a            | 
|          | currency        | 
|          | that is not     | 
|          | the entity's    | 
|          | functional      | 
|          | currency.       | 
+----------+-----------------+ 
|          |                 | 
+----------+-----------------+ 
|          | The             | 
|          | Group           | 
|          | has             | 
|          | certain         | 
|          | investments     | 
|          | in foreign      | 
|          | operations,     | 
|          | whose net       | 
|          | assets are      | 
|          | exposed to      | 
|          | foreign         | 
|          | exchange        | 
|          | risks.          | 
+----------+-----------------+ 
|          |                 | 
+----------+-----------------+ 
| b)       | Credit          | 
|          | risk            | 
+----------+-----------------+ 
|          | The             | 
|          | Group           | 
|          | has no          | 
|          | significant     | 
|          | concentrations  | 
|          | of credit risk  | 
|          | and has         | 
|          | policies in     | 
|          | place to        | 
|          | ensure that     | 
|          | sales are made  | 
|          | to customers    | 
|          | with an         | 
|          | appropriate     | 
|          | credit          | 
|          | history.        | 
+----------+-----------------+ 
|          |                 | 
+----------+-----------------+ 
| c)       | Liquidity       | 
|          | risk            | 
+----------+-----------------+ 
|          | Prudent         | 
|          | liquidity       | 
|          | risk            | 
|          | management      | 
|          | implies         | 
|          | maintaining     | 
|          | sufficient      | 
|          | cash and        | 
|          | available       | 
|          | funding         | 
|          | through an      | 
|          | adequate        | 
|          | amount of       | 
|          | committed       | 
|          | facilities.     | 
|          | The Group       | 
|          | ensures it      | 
|          | has             | 
|          | adequate        | 
|          | cover           | 
|          | through the     | 
|          | availability    | 
|          | of funding      | 
|          | and             | 
|          | facilities.     | 
+----------+-----------------+ 
|          |                 | 
+----------+-----------------+ 
| d)       | Cash            |