Annual Report 2019

132 Annual Report 2019 Miramar Hotel and Investment Company, Limited Notes to the Financial Statements 2 Critical accounting judgements and key sources of estimation uncertainty In the process of applying the Group’s accounting policies, management has made the following judgements: (a) Valuation of investment properties Investment properties are included in the statement of financial position at their market value, which are assessed annually by external qualified valuers, after taking into consideration the net rental income allowing for reversionary income potential. The fair value of investment properties reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the investment properties. (b) Assessment of the useful economic lives for depreciation of other property, plant and equipment The Group depreciates other property, plant and equipment in accordance with depreciation policy as set out in note 1(i). The estimated useful lives reflect the directors’ estimate of the periods during which the Group intends to derive future economic benefits from the use of these assets. (c) Assessment of provision for properties held for resale Management determines the net realisable value of properties held for resale by using the prevailing market data such as most recent sale transactions and market survey reports available from independent property valuers. Management’s assessment of net realisable value of properties held for resale requires judgement as to the anticipated sale prices with reference to the recent sale transactions in nearby locations and the related costs to be incurred in selling the property. The Group’s estimates may not be accurate and might need to be adjusted in later periods.