Notes to the financial statements Year ended 31 December 2024 3. MATERIAL ACCOUNTING POLICIES (continued) (d) Sustainability-linked loans The Group has drawn down on loans with cash flows based on the Group meeting sustainability performance targets set by the lenders from its 2008/2019 baseline. The Group has determined that the variability in cash flows linked to the Group’s sustainability performance target is a non-financial variable specific to the party to the contract, and therefore, in accordance with the Group’s accounting policy, the feature fails the definition of a derivative. Accordingly, the feature is not separated. Instead, it is included in the calculation of the effective interest rate of the loans. (e) Financial guarantees The Group accounts for financial guarantee contracts as financial liabilities. Financial guarantees are financial instruments issued by the Group that require the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at the higher of the loss allowance determined in accordance with FRS 109 Financial Instruments and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of FRS 115 Revenue from Contract with Customers. Expected credit losses (ECLs) are a probability-weighted estimate of credit losses. ECLs are measured for financial guarantees issued as the expected payments to reimburse the holder less any amounts that the Group expects to recover. (f) Investment properties Investment properties are properties held either to earn rental income or for capital appreciation or both. Investment properties are accounted for as non-current assets and are stated at initial cost on acquisition and at fair value thereafter. The cost of a purchased property comprises its purchase price and any directly attributable expenditure. Transaction costs are included in the initial measurement. Fair value is determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers at least once a year in accordance with the CIS Code issued by the MAS. Any increase or decrease on revaluation is credited or charged to the statement of total return as a net change in fair value of the investment properties. Subsequent expenditure relating to investment properties that have already been recognised is added to the carrying amount when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. When an investment property is disposed of, the resulting gain or loss recognised in the statement of total return is the difference between the net proceeds from disposal and the carrying amount of the property. Investment properties are not depreciated. The properties are subject to continued maintenance and regularly revalued on the basis set out above. 110 CapitaLand China Trust
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