150
CDL
HOSPITALITY TRUSTS
26 ACQUISITION OF BUSINESS
On 19 December 2014, the Stapled Group through H-REIT Group and HBT Group acquired the Japan Hotels and
the outstanding shares of a company that operates them respectively. The total consideration was $65.7 million
(or approximately JPY6.0 billion). The purchase price consists of property, plant and equipment of $65.7 million and
net capital of $0.03 million. The preliminary fair value assets allocation indicates the purchase price approximates the
fair value acquired assets and there will be no goodwill. The Stapled Group has one year from the date of purchase
to finalise the allocation of the purchase price between tangible and intangible assets. Based on the preliminary
analysis, the purchase price has been fully allocated to the property, plant and equipment of the Stapled Group's
statement of financial position, and full analysis will be completed in 2015.
27 FINANCIAL RISK MANAGEMENT
Risk management is integral to the whole business of the Stapled Group. The Stapled Group has a system of controls
in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks.
The HBT Trustee-Manager and the H-REIT Manager continually monitor the Stapled Group’s risk management
process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Stapled Group’s activities.
The Audit Committee of the H-REIT Manager and HBT Trustee-Manager assists the H-REIT Manager’s and HBT
Truetee-Manager's Board in reviewing the effectiveness of the Stapled Group’s material internal controls, including
those relating to financial, operational and compliance.
In addition, the Risk Management Committee of the H-REIT Manager and HBT Trustee-Manager also assists
the H-REIT Manager’s and HBT Trustee-Manager's Board in discharging its duties with respect to maintaining
an effective control environment that reflects both the established risk appetite and the business objectives of
the Stapled Group. The Risk Management Committee oversees how management monitors compliance with the
Stapled Group’s risk management policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Stapled Group.
Credit risk
Credit risk is the potential financial loss resulting from the failure of a lessee to settle its financial and contractual
obligations to the Stapled Group, as and when they fall due.
Credit evaluations are performed by the H-REIT Manager and the HBT Trustee-Manager before lease agreements
are entered into with tenants. Rental deposits are received, where appropriate, to reduce credit risk. In addition,
the H-REIT Manager and HBT Trustee-Manager monitors the balances due from its lessees and tenants on an
on-going basis.
The hotel/resort operators which manage the hotels under HBT Group perform credit evaluations on customers
before accepting customers and monitor their balances on an on-going basis.
The Stapled Group establishes an allowance for impairment, based on a specific loss component that relates
to individually significant exposures, that represents its estimate of incurred losses in respect of trade and other
receivables.
The allowance account in respect of trade and other receivables is used to record impairment losses unless the
Stapled Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is
considered irrecoverable and the amount charged to the allowance account is written off against the carrying
amount of the impaired financial asset.
NOTES TO THE FINANCIAL STATEMENTS
