NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D.) 3.1 Key sources of estimation uncertainty (cont’d.) (d) Fair valuation of investment properties T he Group carries its investment properties at fair value, with changes in fair value being recognised in the profit or loss. Significant judgement is required in determining the fair value which may be derived based on different valuation methods. In making the judgement, the Group engaged independent valuation specialists to determine the fair values as disclosed in Note 17. (e) Income tax S ignificant judgement and estimates are used in arriving at taxable profits for the year and for prior years, including assessing the deductibility of expense items for tax purposes. Management are guided by tax laws/cases on such instances. Management believes that all deductions claimed, in arriving at taxable profits for current and prior years, are appropriate and justifiable. (f) Inventories Inventories are stated at the lower of cost and net realisable value. S ignificant judgement is required in arriving at the net realisable value, particularly the estimated selling price of inventories in the ordinary course of the business. The Group has considered all available information, including but not limited to property market conditions, locations of property inventories and target buyers. Details of inventories are disclosed in Note 16. 3.2 Judgement made in applying accounting policies I n the process of applying the Group’s and the Company’s accounting policies, management has made the following judgements, apart from there involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Classification between investment properties and property, plant and equipment T he Group has developed certain criteria based on MFRS 140 in making judgement whether a property quali es as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a nance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insigni cant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so signi cant that a property does not qualify as investment property. 194 ANNUAL REPORT 2022
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