Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 104 The United Laboratories International Holdings Limited Annual Report 2020 19. INVESTMENT PROPERTIES AND PROPERTIES HELD FOR DEVELOPMENT (Continued) c) Fair value measurement of investment properties As set out in Note 10, the Group disposed of the investment properties on 6 November 2019. The investment properties were measured at fair value on 6 November 2019 with a fair value loss determined by the directors of the Company by reference to a valuation performed by Ravia Global Appraisal Advisory Limited (“Ravia”) of approximately RMB97,614,000. Ravia, a member of the Hong Kong Institute of Surveyors, is an independent qualified professional valuer which is not connected with the Group and has appropriate qualifications. The carrying amounts of investment properties represent land held for development for investment purposes. In determining the fair value of the investment properties, the management of the Group determines the appropriate valuation techniques and inputs for fair value measurements. The Group engages and works closely with Ravia to perform the valuation and establish the appropriate valuation techniques and inputs to the model. The management of the Group reports the findings to the board of directors of the Company on a regular basis to explain the cause of fluctuations in the fair value of the investment properties. There was no comparable recent sale transaction of land with similar size available in the relevant markets and accordingly the valuation of the Chengdu Lands was determined using the residual method, i.e. discounted cash flows of expected gross development value of the Chengdu Lands and deducting therefrom, inter alia, the estimated development costs to be incurred to arrive at the residual value. The discounted cash flows involve the use of a number of unobservable inputs, such as expected selling price of completed units, construction period, finance costs, construction cost and developer’s profit margin, which would expose the Group to fair value measurement risks. Prior to the date of disposal, the management revisited average construction cost and average selling price of the investment properties and adjusted the inputs to the model after considering an increase in average construction cost and a decrease in average selling price with reference to the prevailing market conditions, resulting in a decrease of RMB97,614,000 in fair value of the investment properties.