Abacus Property Group – Annual Financial Report 2018
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Investment Properties<br />
Why significant<br />
The <strong>Group</strong>’s total assets include investment<br />
properties either held directly or via interests in<br />
Joint Ventures. These assets are carried at fair<br />
value, which is assessed by the directors with<br />
reference to either external independent<br />
property valuations or internal valuations, and<br />
are based on market conditions existing at the<br />
reporting date.<br />
This was considered a key audit matter due to<br />
the number of judgments required in<br />
determining fair value. These judgments include<br />
assessing the capitalisation rate, discount rate,<br />
market rent, re-leasing costs and forecast<br />
occupancy levels.<br />
Disclosure of investment properties and<br />
significant judgments are included in Note 5 of<br />
the financial report.<br />
How our audit addressed the key audit matter<br />
Our audit procedures included the following:<br />
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We assessed the effectiveness of relevant<br />
controls over the leasing process and associated<br />
tenancy reports which are used as source data in<br />
the property valuations by testing a sample of the<br />
relevant controls.<br />
For a sample of internal and external valuations,<br />
we evaluated the key assumptions and tested key<br />
inputs to tenancy schedules. These assumptions<br />
and inputs included market and contractual rent,<br />
occupancy rates including forecast occupancy<br />
levels, lease terms, re-leasing costs, operating<br />
expenditure and future capital expenditure.<br />
For a sample of internal valuations we tested the<br />
mathematical accuracy of the valuation.<br />
For selected properties we involved our real<br />
estate specialists to assist with the assessment of<br />
the valuation.<br />
Where relevant we evaluated the movement in<br />
the capitalisation rates across the portfolio based<br />
on our knowledge of the property portfolio,<br />
published industry reports and comparable<br />
external valuations.<br />
Where relevant we assessed the reasonableness<br />
of comparable transactions utilised in the<br />
valuation process.<br />
We evaluated the suitability of the valuation<br />
methodology across the portfolio based on the<br />
type of asset; and<br />
We assessed the qualifications, competence and<br />
objectivity of the valuers.<br />
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