Ascendas REIT - Annual Report 2021

Key Audit Matters (continued) Valuation of Investment properties and Investment properties under development The Group owns a portfolio of investment properties and investment properties under development, comprising business and science park properties, integrated development, amenities and retail properties, high-specifications industrial properties, data centres, light industrial properties and flatted factories and logistics and distribution centres, located in Singapore, Australia, the United Kingdom / Europe and the United States. As at 31 December 2021, the investment properties and investment properties under development, with a carrying amount of $16.5 billion, represent the single largest asset category on the statement of financial position. The investment properties and investment properties under development are stated at their fair values based on independent external valuations. The valuation process is considered a key audit matter because it involves significant judgement in determining the appropriate valuation methodology to be used, and in estimating the underlying assumptions to be applied coupled with heightened level of estimation uncertainty associated with the market and economic conditions prevailing at the reporting date. As disclosed in Note 29(d), the valuations are highly sensitive to changes in the key assumptions applied, particularly those relating to capitalisation, discount, terminal yield and equivalent yield rates, and price per square metre. Certain external valuers have also highlighted in their valuation reports that COVID-19 pandemic may continue to affect the real estate market, and the valuation of properties should be kept under continuous review. We assessed the Group’s process relating to the selection of the external valuers, the determination of the scope of work of the valuers, and the review of the valuation reports issued by the external valuers. We evaluated the objectivity, independence and competence of the external valuers. We also read the terms of engagement of the valuers entered into with the Group to determine whether there were any matters that might have affected the valuers’ objectivity or placed limitations in the scope of their work. We held discussions with the external valuers to understand the valuation methodologies used in the valuation and compared against those applied by other valuers for similar property types within the Group, including key valuation adjustments made by the external valuers in response to the changes in market and economic conditions brought on by the COVID-19 pandemic. We assessed the reasonableness of the projected cash flows used in the valuations by comparing to supporting leases and external industry and available economic data. We assessed the reasonableness of the capitalisation, discount and terminal yield rates, and price per square metre, used in the valuations by comparing them against historical rates and available industry data, taking into consideration comparability and market factors. We also assessed the overall appropriateness of the movements in fair value of the investment properties and investment properties under development. We further reviewed the adequacy of the disclosures in Notes 4 and 5 to the financial statements. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independent Auditor’s Report YEAR ENDED 31 DECEMBER 2021 Annual Report 2021 157