Key Audit Matter Valuation of investment properties How our audit addressed the Key Audit Matter Refer to note 16 to the consolidated financial statements The fair value of the Group’s investment properties Our procedures in relation to the valuation of investment amounted to HK$271,368 million at 31st December 2022, properties included: with a fair value gain of HK$801 million recorded in the • Understanding management’s controls and processes for consolidated statement of profit or loss for the year. determining the valuation of investment properties and Valuations were obtained from third party valuers (the assessing the inherent risk of material misstatement by “valuer”) in respect of 97% of the investment properties as considering the degree of estimation uncertainty and the at 31st December 2022. The valuations are dependent on judgement involved in determining assumptions to be certain key assumptions that require significant applied; management judgement, including capitalisation rates and • Evaluating of the valuers’ competence, capabilities, market rents. The valuations of investment properties under independence and objectivity; development are also dependent upon the estimated costs to complete and expected developer’s profit margin. • Meeting the valuers to discuss the valuations and key assumptions used; • Reviewing of the external valuation reports to assess the appropriateness of methodologies used; • Comparing of the capitalisation rates, market rents and expected developer’s profit margin used by the valuers to an estimated range, determined by reference to publicly available information by our in-house valuation experts; • Checking the accuracy of the rental data provided by management to the valuers by agreeing them on a sample basis to the Group’s records; and • For investment properties under development, comparing the estimated construction costs to complete with the Group’s budgets. We found the key assumptions were supported by the available evidence. We found the disclosures in note 16 to be appropriate. SWIRE PROPERTIES ANNUAL REPORT 2022 131