Asia-Pacific Strategic Investments Limited - Annual Report 2021

Independent Auditor’s Report To the Members of Asia-Pacific Strategic Investments Limited

Key Audit Matters (continued)

1.

Valuation and impairment of assets (continued)

(a)

Property, plant and equipment and development properties [Refer to Notes 3.1, 3.2, 17 and 19]

Area of focus

The Group has completed the development of the hotel building and commenced operations of the hotel since October 2019, however the construction of the development properties has not commenced as at 30 June 2021. The Group is working on the master development plan with the relevant local government agencies as Huzhou City is currently preparing the Huzhou City National Land and Space 2020 – 2035 (the “15-year Plan”), accordingly, the Group will further revise the master development plan to comply with the requirement of the 15-year Plan once it is finalised and published. As at 30 June 2021, the assets used for the hotel operations which are included in property, plant and equipment, amounted to S$29,843,000. Due to resurgence of COVID-19 cases in December 2020, the hotel operations have been temporarily affected by the safety measures implemented by the local government, such as restriction in holding corporate events in the hotel. As the COVID-19 situation remains uncertain, there is objective evidence or indicator that the hotel building and its property, plant and equipment (collectively, the “Hotel Assets”) may be impaired. Management has performed impairment assessment for the Group’s Hotel Assets and engaged an external professional valuer to determine its recoverable amount. As at 30 June 2021, the carrying amount of development properties of the Huzhou Project amounted to S$13,642,000. In view of the economic downturn caused by COVID-19 and the recent development of the 15-year Plan in Huzhou City, there has been a slowdown in the progress of finalising the development implementation and business plans for the Huzhou Project. The realisation of the carrying amount of development properties is dependent on the Group’s ability and intention to continue with the development and whether there is existence of adverse situations which causes the net realisable value to be less than the carrying amount. There is a risk that the carrying amount of the development properties may be higher than its net realisable value and that the amount may be overstated in the financial statements. We focused on this area as a key audit matter because the carrying amounts of property, plant and equipment and development properties are significant to the Group and significant judgement is applied in determining the recoverable amounts such as discount rate, room occupancy rate, growth rate, including expectations of future events that are believed to be reasonable under the circumstances. There is also high degree of estimation uncertainty inherent in assessing the duration and severity of the economic downturn caused by COVID-19 and the pattern of any expected recovery which are considered in the impairment assessment. (i) Hotel operations (ii) Development properties

ANNUAL REPORT 2021

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