(in millions of euros) | Total investment property |
Composition as at 1 January 2019 | |
Cost | 282 |
Accumulated depreciation and impairments | -131 |
Carrying amount as at 1 January 2019 | 151 |
Changes in 2019 | |
Investments | 2 |
Depreciation | -8 |
Disposals | -3 |
Impairments | - |
Reversal of impairments | - |
Other changes | -7 |
Total changes during the financial year | -16 |
Composition as at 31 December 2019 | |
Cost | 263 |
Accumulated depreciation and impairments | -128 |
Carrying amount as at 31 December 2019 | 135 |
Changes in 2020 | |
Additions | - |
Depreciation | -8 |
Disposals | - |
Impairments | - |
Reversal of impairments | 3 |
Other changes | -1 |
Total changes during financial year | -6 |
Composition as at 31 December 2020 | |
Cost | 260 |
Accumulated depreciation and impairments | -131 |
Carrying amount as at 31 December 2020 | 129 |
In addition to business premises, investment property for third parties also consists of property let to third parties or held as strategic property. In addition, the Group also has property intended for its own use, recognised under property, plant and equipment. The rental arrangements generally include a period of several years during which cancellation is not possible. This investment property and property, plant and equipment (property for own use) are not part of the main rail network cash-generating unit (as described in note 14).
In view of the nature, diversity and locations (station areas), the fair value of the investment property portfolio is not determined on a regular basis, unless impairment applies. No impairments have occurred on this portfolio and the fair value is expected to exceed the carrying amount of the investment property. The Group has reached this conclusion based on indicative management estimates on the basis of which there are no indications of impairment.
As a consequence of COVID-19, reductions of €19 million have been granted for 2020. These rent reductions led to a €13 million write-down of the accounts receivable balance. €6 million is amortised over the remaining term of the rental contracts.
The reversal of impairment relates to a number of rental properties, the assessed value of which in rented condition is higher than the carrying amount.
The overall contractual rent up to the end of the rental contracts was around €359 million as at 31 December 2020 (2019: €280 million). No contingent rent is charged.
The direct rental income was €29 million (2019: €35 million). The direct rental costs comprise maintenance costs, property taxes and direct management costs, totalling €6 million (2019: €7 million).
Accounting policy
Investment property includes property held in order to earn rental income, an appreciation in value or both. Investment property is measured at cost, less accumulated depreciation and accumulated impairment losses. The cost of self-produced assets includes the cost of materials, direct labour costs, a reasonable portion of the indirect production costs and borrowing costs. Where relevant, the estimated costs of dismantling and removing the asset and the costs of restoring the site where the asset was located are added to the total cost.
The following accounting policies apply to investment property:
Components
If investment property consists of components with differing useful lives, these components are listed as separate items under the investment property.
The carrying amount of an investment property is adjusted for the cost of replacing all or part of that asset when such costs are incurred and if it is likely that the replacement will result in future economic benefits. All other costs of maintaining the asset are charged to the income statement when they are incurred.
Depreciation
Depreciation of investment property happens on a straight-line basis, after deducting the residual value and based on the estimated useful life of each individual item of investment property. Depreciation is charged to the income statement.
The estimated useful life for different types of investment property is as follows:
Asset type | Depreciation period |
Foundations and underlying land | 100 years |
Structure and core | 50 years |
Facades and outer walls | 33 years |
Roofing | 15 years |
Interior finish | 15 years |
Technical equipment | 15 years |
The specified useful life is an average for the assets concerned and for any components of which those assets consist. The depreciation method, remaining useful life and residual value are reviewed each year.