Annual Report 2023

185 2023 Annual Report Transport International Holdings Limited INDEPENDENT AUDITOR’S REPORT Key audit matters (continued) Assessing the valuation of investment properties and investment property under development Refer to note 14 to the consolidated financial statements and the accounting policies on page 206. The Key Audit Matter How the matter was addressed in our audit The Group holds a portfolio of investment properties and investment property under development located in Hong Kong. These properties mainly comprise shopping malls, office premises and industrial buildings. At 31 December 2023, the Group’s investment properties and investment property under development amounted to HK$8,212 million which represented 34% of the Group’s total assets. The fair values of investment properties and investment property under development at 31 December 2023 were assessed by the management based on valuations prepared by a firm of qualified external property valuers. Increase in fair value of investment properties and investment property under development of HK$287 million were recorded in the consolidated statement of profit or loss. We identified assessing the valuation of investment properties and investment property under development as a key audit matter because of the significance of investment properties and investment property under development to the consolidated financial statements and because the determination of the fair values involves significant judgement and estimation, including selecting the appropriate valuation methodology, capitalization rates and market rents and, for investment properties under development, an estimation of costs to complete each property development project. Our audit procedures to assess the valuation of the investment properties and investment property under development included the following: – obtaining and inspecting the valuation reports prepared by the external property valuers on which the management’s assessment of the fair values of investment properties and investment property under development was based; – assessing the independence, qualifications and expertise of the external property valuers’ engaged by management; – with the assistance of our internal property valuation specialists and utilising their industry knowledge and experience, discussing with the external property valuers, without the presence of management, their valuation methodologies with reference to the prevailing accounting standard; and assessing the key estimates and assumptions adopted in the valuation by comparing capitalisation rates, prevailing market rents and comparable market transactions with the available market data; – on a sample basis, comparing tenancy information, including committed rents and occupancy rates, provided by management to the external property valuers, with underlying contracts and related documentation; – evaluating management’s development budgets reflected in the latest forecasts with reference to market statistics on estimated construction costs, signed construction contracts and/or unit construction costs of recently completed projects.