100 101
3.
Critical accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities at the end of each reporting period. Uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the asset or liability affected in the future periods.
3.1 Judgements Made in Applying Accounting Policies
Determination of lease classification
The Group has entered into commercial property leases on its investment properties. The Group has determined, based on
an evaluation of the terms and conditions of the arrangements such as the lease term not constituting a substantial portion
of the economic life of the commercial property, that it retains all the significant risks and rewards of ownership of these
properties and so accounts for the contracts as operating leases.
3.2 Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting
period are discussed below. The Group based its assumptions and estimates on parameters available when the financial
statements were prepared. Existing circumstances and assumptions about future developments, however, may change due
to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
(a)
Fair value of available-for-sale financial instruments
Where the fair values of financial instruments recorded on the balance sheet cannot be derived from active markets,
they are determined using valuation techniques including the discounted cash flow model. The inputs to these models
are derived from observable market data where possible, but where this is not feasible, a degree of judgment is
required in establishing fair values. The judgments include considerations of liquidity and model inputs regarding the
future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and
geographical jurisdiction in which the investee operates. Changes in assumptions about these factors could affect the
reported fair value of financial instruments. The valuation of financial instruments is described in more detail in Note 28.
(b)
Valuation of investment properties and investment properties under construction
The Group carries its investment properties and investment properties under construction at fair value, with changes
in fair values being recognised in profit or loss.
The fair values of investment properties and investment properties under construction are determined by real estate
valuation experts using recognised valuation techniques. These techniques comprise both the income capitalisation
method and the discounted cash flow method.
The determination of the fair values of the investment properties and investment properties under construction require
the use of estimates such as future cash flows from assets (such as lettings, tenant’s profiles, future revenue streams,
capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and
condition of the property) and discount rates applicable to those assets. These estimates are based on local market
conditions existing at the end of each reporting date.
The carrying amount and key assumptions used to determine the fair value of the investment properties and investment
properties under construction are further explained in Note 28. The Trustee-Manager is of the view that the valuation
methods and estimates are reflective of the current market condition.
