Annual Report - QuamIR

Notes to the Consolidated Financial Statements (Continued)
4 Critical accounting estimates and judgements (Continued)
(a) Valuation of investment properties/recoverable
amount of prepaid land lease payments
(Continued)
For the prepaid land lease payments, management determined
the recoverable amount based on the valuation report prepared
by Knight Frank. Knight Frank has valued the investment
properties under development/recoverable amount of prepaid
land lease payments on the basis that the properties will
be developed in accordance with the information provided
from management. It is assumed that approvals for the
development scheme will be obtained without any onerous
condition which would affect the value of investment properties
under development/recoverable amount of prepaid land lease
payments. In arriving the opinion of value, Knight Frank has made
reference to comparable transactions in the locality and has also
taken into account the construction costs that will be expended
to complete the development and the quality of the completed
development in the development scheme.
Management has reviewed the Knight Frank valuation and
compared it with its own assumptions, with reference to
comparable sales transaction data where such information is
available, and has concluded that the Knight Frank valuation
of the Group’s investment portfolio and prepaid land lease
payments is reasonable.
If the valuation of the investment properties (included investment
properties classified as assets held for sale) had been 10%
higher or lower than the value stated on the valuation report,
the fair value adjustment for the year arising from the Group’s
investment properties would have been increased or decreased
by HK$596.6 million (2010: HK$719.7 million).
If the recoverable amount of the prepaid land lease payments
had been 10% higher than the value stated on the valuation
report, assuming that the conditions of the reversal are met,
the reversal of provision for impairment loss for the year arising
from the Group’s prepaid land lease payments would have
been increased by HK$371.1million (2010: HK$159.2 million).
If the recoverable amount had been lower by 10%, provision
for impariment loss for the year would have been increased by
HK$1.5 million (2010: HK$290.6 million).
4
(a)
10%
596,600,000
719,700,000
10%
371,100,000
159,200,000
10%
1,500,000
290,600,000
118 HKC (Holdings) Limited • Annual Report 2011