NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 4 PROPERTY, PLANT AND EQUIPMENT (CONT’D) Leasehold land and buildings Furniture, fittings, plant and equipment and improvements Total $’000 $’000 $’000 Group Balance at 1 January 2023 735,285 3,595 738,880 Additions to right-of-use assets 13,496 1,128 14,624 Disposal/Written off (9,046) (15) (9,061) Depreciation charge for the year (34,236) (1,468) (35,704) Translation differences on consolidation (3,219) (33) (3,252) Balance at 31 December 2023 702,280 3,207 705,487 Buildings $’000 Company Balance at 1 January 2022 15,704 Additions to right-of-use assets 21,905 Depreciation charge for the year (6,261) Balance at 31 December 2022 31,348 Balance at 1 January 2023 31,348 Depreciation charge for the year (6,270) Balance at 31 December 2023 25,078 (a) Included in property, plant and equipment are certain hotel properties of the Group with carrying amount totalling $263,675,000 (2022: $381,711,000) which are mortgaged to certain financial institutions to secure credit facilities (refer to notes 22, 23 and 24 for more details of the facilities). (b) In 2022, the Group transferred the reversionary interest of three hotels leased to CDL Hospitality Trusts (CDLHT) from property, plant and equipment to investment properties located in Singapore, following the deconsolidation of CDLHT (refer to note 39). The Group also reclassified a hotel under development from property, plant and equipment to development properties, as the hotel was developed with the intention for sale to CDLHT. (c) The Group undertook its annual review of the carrying amounts of hotels and property assets for indicators of impairment. Where indicators of impairment were identified, the recoverable amounts were estimated based on internal or external valuations undertaken by the Group. The cash generating units (CGU) are individual hotels. 4 PROPERTY, PLANT AND EQUIPMENT (CONT’D) The recoverable amounts of the individual hotels, being the higher of the fair value less costs to sell and the value-in-use, were predominantly determined using the fair value less costs to sell approach and were estimated using the discounted cash flow method (2022: discounted cash flow method). Under this methodology, the fair value measurement reflects current market expectations about an efficient third party operator’s future cash flows. The discounted cash flows method involves estimating each hotel’s future cash flows and discounting the cash flows with an internal rate of return to arrive at the market value, taking into consideration the assumptions in respect of revenue growth (principally factoring in room rate and occupancy growth) and major expense items for each hotel. The future cash flows are based on assumptions about competitive growth rates for hotels in that area, as well as the internal business plan for the hotel in the relevant market. These plans and forecasts include management’s most recent view of trading prospects for the hotel in the relevant market. Where appropriate, the Group sought guidance on the fair values of the hotels from independent external valuers with appropriate professional qualifications and recent experience in the location and category of the properties being valued. In relying on the valuation reports, the Group has exercised its judgement and is satisfied that the valuation method and estimates are reflective of current market conditions. Certain valuation reports obtained from the external valuers have highlighted that a combination of global inflationary pressures, rising interest rates, geopolitical tensions and tightened lending conditions, has heightened the potential for greater volatility in property markets over the short to medium term. The fair value measurement was categorised as a Level 3 fair value based on the inputs to the valuation technique used. In 2023, the Group recognised a reversal of impairment loss of $54,037,000 primarily attributable to six hotels in United States of America (US) and one hotel in Europe. The impairment losses reversed during the year mainly arose from the improved trading performances of certain hotel properties, following the progressive recovery of the hospitality sector in the countries in which these hotels are located. The estimated total recoverable amounts of the properties on which impairment losses were reversed during the year were $977,411,000 as at 31 December 2023. In 2022, the Group recognised a net reversal of impairment loss of $28,113,000 on certain hotel properties, comprising reversal of impairment losses of $33,778,000 on four hotels in United States of America (US) and three hotels in Europe, net of impairment losses made of $5,665,000 in respect of one hotel in New Zealand and a club in Asia. The impairment losses reversed during the year mainly arose from the improved trading performances of certain hotel properties, following the progressive recovery of the hospitality sector in the countries in which these hotels are located. The impairment loss recognised on the club in Asia was a result of its weak financial performance. The estimated total recoverable amounts of the properties on which impairment losses were reversed or impaired during the year were $615,980,000 as at 31 December 2022. Impairment losses recognised or reversed were included in “other operating expenses” in the consolidated statement of profit or loss and the hotel operations segment. FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 163 162
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