Annual Report 2021

150 Notes to the Financial Statements Annual Report 2021 Miramar Hotel and Investment Company, Limited 10 Investment properties, other property, plant and equipment (Continued) (b) Fair value measurement of investment properties (continued) (ii) Information about Level 3 fair value measurements Unobservable inputs Valuation techniques Range of capitalisation rates Investment properties Income capitalisation approach In Hong Kong – Retail 2.8% to 6.0% (2020: 3.0% to 6.0%) – Office 4.1% (2020: 4.1%) In the PRC – Retail 8.5% (2020: 8.5%) – Serviced apartment 7.0% (2020: 7.0%) The fair value of investment properties is based on income capitalisation approach which capitalised the net income of the properties under the existing tenancies and upon reversion after expiry of the current lease. The fair value measurement is negatively correlated to the capitalisation rate. The movements during the year in the balance of Level 3 fair value measurements are set out in note 10(a) to these financial statements. Fair value adjustment of investment properties is recognised in the line item “net decrease in fair value of investment properties” on the face of the consolidated statement of profit or loss. Exchange adjustments of investment properties are recognised in other comprehensive income in “exchange reserve”. All the gains recognised in profit or loss for the year arise from the properties held at the end of the reporting period. (c) The analysis of cost or valuation of properties is as follows: 2021 2020 HK$’000 HK$’000 Land and buildings in Hong Kong: – long leases 145 145 – medium term leases 14,617,559 14,707,454 Land and buildings outside Hong Kong: – medium term leases 748,707 733,160 – freehold 57,067 57,051 15,423,478 15,497,810