KEY AUDIT MATTERS (CONT’D.) Valuation of investment properties (Refer to Note 17 to the financial statements) The carrying value of the Group’s investment properties as at 31 December 2024 was RM415,110,000, representing 6% and 4% of the Group’s total non-current assets and total assets respectively. The Group adopts fair value model for its investment properties. When estimating the fair value of a property, the objective is to estimate the price that would be received from the sale of the investment property in an orderly transaction between market participants at the reporting date under current market conditions. In addition, the fair value should reflect, among other things, the property related data used as input to the valuation model and other assumptions that market participants would use when pricing the investment property under current market conditions, which are highly judgmental. Accordingly, we consider this to be an area of audit focus. How have our audit addressed the matter Our audit procedures focused on the valuations performed by firms of independent valuers, which included amongst others the following procedures: • Considered the objectivity, competence and capabilities of the firms of independent valuers; • Obtained an understanding of the methodology adopted by the independent valuers in estimating the fair values of the investment properties and assessed whether such methodology is consistent with those used in the industry; • As part of our evaluations of the fair values of investment properties, we had discussions with the independent valuers to obtain an understanding of their valuation process which included assessment of the comparability of historical transactions used and property related data used as input to the valuation models; • Obtained an understanding of the adjustments factors made by the valuers to account for differences in, amongst others, the occupancy rate, property’s location, property’s size and tenure between the subject property and the comparable properties; and • Assessed whether the capitalisation rate used in the valuation models reflects the return that investors would require if they were to choose an investment that would generate cash flows of amounts, timing and risk profile equivalent to those that the entity expects to derive. Valuation of land held for sale (Refer to Note 16(c) to the financial statements) As of 31 December 2024, the Group’s land held for sale, which is classified as inventories, had a carrying amount of RM1,117,644,000, representing 11% of the Group’s total assets. The Group recognised an inventory write-down to its net realisable value, amounting to RM133,041,000, which represents 57% of the Group’s loss after tax during the financial year. The estimates of net realisable values are based on the estimated selling price at the time the estimate is made, as well as the estimated costs of completion and costs necessary to make the sale. These estimates involve some degree of subjectivity, so we consider this area to be an audit focus. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF TROPICANA CORPORATION BERHAD (INCORPORATED IN MALAYSIA) ANNUAL REPORT 2024 232
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