Positioning for the Future | 135
Appendix
Notes to the Financial Statements
Year ended 31 December 2014
3
PROPERTY, PLANT AND EQUIPMENT
(cont’d)
(a) As at 31 December 2014, certain property, plant and equipment with carrying value totalling approximately
$329.3 million (2013 $345.2 million) were mortgaged to banks to secure credit facilities for the Group
(note 19).
(b) In 2014, the Group transferred a portion of an investment property amounting to $251.3 million to property,
plant and equipment. The amount transferred represented the area that was owner-occupied.
(c) In 2013, the Group transferred $125.9 million of assets under construction that were under property, plant
and equipment to investment properties under development as the property ceased to be owner-occupied.
(d) In 2013, the Group recognised an impairment loss of $12.3 million relating to a piece of land in India. The
recoverable amount was determined based on fair value less costs to sell using valuations performed by
independent valuers. The direct comparison method was adopted in deriving the valuations and fair value
measurement is categorised as Level 3 on the fair value hierarchy. The loss was recognised in “Other
Operating Expenses” in the promt or loss.
(e) Residual values of serviced residence properties at the end of the intended holding period are determined
based on annual independent professional valuations using discounted cashnow method. The fair value
measurement is categorised as Level 3 on the fair value hierarchy. Residual value is the estimated amount
that the Group would obtain from the disposal of a property if the property is already of the age and in
the condition expected at the date when the Group has the intention to dispose that property. The key
assumptions used to determine the residual values of serviced residence properties include market
corroborated capitalisation yield, terminal yield, discount rate and revenue per available unit (RevPau).
In relying on valuation reports, management is satismed that the valuation methods and estimates are renective
of current market conditions. Details of valuation techniques and signimcant unobservable inputs are set out
in the table below.
Type
Valuation
method
Key
unobservable inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Serviced residence
properties located
in Europe and
Hong Kong.
Discounted
cashnow
approach
- Discount rate
2014 7.0% to 7.8%
(2013 7.8% to 8.5%)
- Terminal yield rate
2014 3.5% to 5.8%
(2013 5.3% to 6.0%)
- RevPau
2014 $274 to $519
(2013 $322 to $578)
The estimated fair value
varies inversely against the
discount rate and terminal
yield rate and increases
with higher RevPau.
