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EC World Real Estate Investment Trust ANNUAL REPORT 2016
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the financial year ended 31 December 2016. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
As at 31 December 2016, the carrying
value of the Group’s investment
properties of S$1,333 million
accounted for 90% of the Group’s
total assets.
The valuation of the investment
properties was a key audit matter
due to the significant judgement in
the key inputs used in the valuation
techniques. These key inputs include
growth rate of rents, discount rate
and the terminal capitalisation rate,
and are dependent on the nature of
each investment property and the
prevailing market conditions.
Our procedures performed to ascertain the appropriateness of the key inputs
and assumptions used in the valuation included the following:
•
assessed the competency, independence and integrity of the
professional valuers engaged by the Group;
•
obtained an understanding of the techniques used by the external
valuers in determining the valuations of individual investment
properties;
•
discussed the critical assumptions made by the external valuers for the
key inputs used in the valuation techniques;
•
tested the integrity of information, including underlying lease and
financial information provided to the professional valuers;
•
assessed the reasonableness of forecasted rental income and related
expenses by comparing them against current year actual results and
historical growth rates; and
•
compared the discount and terminal capitalisation rates used against
those used for similar properties and in prior year.
We have also assessed the adequacy of the disclosures relating to the
assumptions, as we consider them as likely to be significant to users of the
financial statements given the estimation uncertainty and sensitivity of the
valuations.
The valuers are members of recognised professional bodies for external
valuers. We found that the valuation methodologies used were in line with
generally accepted market practices and the key assumptions used were
within the range of market data. We also found the disclosures in the financial
statements to be appropriate.
INDEPENDENT AUDITOR’S REPORT
to the Unitholders
OF EC WORLD REIT
(Constituted under a Trust Deed in the Republic of Singapore)