Annual Report 2019

FAR EAST CONSORTIUM INTERNATIONAL LIMITED 146 INDEPENDENT AUDITOR’S REPORT KEY AUDIT MATTERS (continued) Key audit matter How our audit addressed the key audit matter Valuation of investment properties We identified the valuation of investment properties as a key audit matter due to the significance of the balance to the consolidated financial statements as a whole, combined with the significant judgements and estimation associated with determining the fair values. The investment properties are located in Australia, Hong Kong, the People’s Republic of China and Singapore. The investment properties were carried at HK$5,426,396,000 as at 31 March 2019 and represents approximately 14% of total assets in the consolidated financial statements of the Group as at 31 March 2019. As disclosed in note 8 to the consolidated financial statements, changes in fair value of investment properties of HK$672,530,000 was recognised in the consolidated statement of profit or loss for the year then ended 31 March 2019. As disclosed in note 15 to the consolidated financial statements, all of the Group’s investment properties are held at fair value based on the valuations performed by independent qualified professional valuers (the “Valuers”). The valuations of investment properties are dependent on certain key inputs that require significant judgments and estimation by the directors of the Company, including market rent, market unit rate and capitalisation rate. Our procedures in relation to the valuation of investment properties included: • Evaluating the competence, capabilities and objectivity of the Valuers and obtaining an understanding of their scope of work and their terms of engagements; • Obtaining an understanding of the valuation methodology and significant assumptions to assess if these approaches meet with industry norms; • Evaluating the reasonableness of the key inputs, including market rent, market unit rate and capitalisation rate adopted by the management and the Valuers, on a sample basis, by comparing the key inputs to relevant market data based on our knowledge of the property markets; and • Assessing the accuracy of the information provided by the management to the Valuers by agreeing the rental income and tenancy summary to the respective underlying tenancy agreements, on a sample basis.