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ANNUAL REPORT
2016
Our audit procedures comprised, amongst others, assessment of the methodology and the
appropriateness of the valuation models and inputs used for valuation of investment securities. As
part of these audit procedures we assessed the accuracy of key inputs used in the valuation such
as the expected cash flows, risk free rates and credit spreads by benchmarking them with external
data. We also evaluated the Group›s assessment whether objective evidence of impairment exists for
individual investments, whether it represents significant or prolonged decline. Finally, we assessed
the appropriateness of disclosures relating to investment securities, as shown in Note 12 of the
consolidated financial statements.
b) Valuation of investment properties
Investment properties of the Group represent a significant part of the total assets and is carried at fair
value as at 31 December 2016.
The management is determining the fair value of its investment properties and uses external appraisers
to support the valuation. The valuation of the investment properties at fair value is highly dependent
on estimates and assumptions such as rental value, occupancy rates, discount rates, financial stability
of tenants, market knowledge and historical transactions. Further, the disclosures relating to the
assumptions are relevant, given the estimation uncertainty and sensitivity of the valuations. Given the
size and complexity of the valuation of investment properties and the importance of the disclosures
relating to the assumptions used in the valuation, we considered this as a key audit matter.
We have evaluated the assumptions and estimatesmade by themanagement and the external appraisers
in the valuation to assess the appropriateness of the data supporting the fair value. Our real estate
specialists were part of our audit team for evaluating the external valuation, including the assumptions
and estimates used. Amongst others, we have considered the objectivity, independence and expertise
of the external appraisers. Furthermore, we assessed the appropriateness of the disclosures relating to
the sensitivity of the assumptions as shown in Note 9 of the consolidated financial statements.
c) Properties held for trading
Properties held for trading represent a significant part of total assets and is carried at the lower of
cost or net realisable value, which requires management’s judgement in determining the appropriate
costing basis and provision for write down of properties held for trading since they are based on
forecast of estimated selling price less costs to sell and assessing whether the provision is adequate.
Given the size and complexity of the valuation of properties held for trading, we addressed this as a
key audit matter.
We have tested a sample of properties held for trading to assess the cost basis and challenged the
estimates made by management by assessing whether the estimates regarding sales forecasts and sales
prices are based on the existing contracts and whether these are in line with historical revenues to
date. Further, we have assessed the determination of the net realisable value by verifying recent sales
transactions and the related costs necessary to make the sale. Further, we compared the properties held
for trading provision to the Group›s policy and evaluated management›s judgement on the adequacy of
this by performing a review of the overall level of provisions on an aggregate as well as understanding
the levels of demand for properties. Finally, we assessed the appropriateness of disclosures relating to
properties held for trading, as shown in Note 13 of the consolidated financial statements.
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