Page 148 - URA Annual Report 2021-22

NOTES TO THE FINANCIAL STATEMENTS
(expressed in Hong Kong Dollars)
3. Financial risk management and fair value of financial instruments (Continued)
(c) Fair value measurement
The carrying amounts of the Group’s financial assets including amounts due from joint development projects, cash and bank balances, investments at amortised cost and trade and other receivables; and financial liabilities including amounts due to joint development projects and trade and other payables, approximate their fair values.
The carrying amounts of the Group’s building rehabilitation loans and debt securities issued approximate their fair value as the impact of discounting is insignificant.
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of properties and provision for a committed project
Properties are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired in accordance with the accounting policy stated in Note 2(h).
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past and committed events in accordance with the accounting policy stated in Note 2(n). When the estimated value of the committed project is lower than the estimated development and related costs of the project, a provision would be recognised.
The valuations of properties and provision for committed projects are made on the basis of the “Market Value” adopted by the Hong Kong Institute of Surveyors (“HKIS”). The valuation is performed annually by internal valuers who are qualified members of the HKIS. The Group’s management review the assumptions used by the internal valuers by considering the information from a variety of sources including (i) current prices in an active market for properties of different nature, condition or location, adjusted to reflect those differences; (ii) recent prices of comparable properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; (iii) expected arrangement with property developers on tender awarded; (iv) estimated development and related costs and allocation thereof; and (v) discount rate used in land value assessment, which is made with reference to the Prime Rate.
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