Hyprop Investments Limited Integrated annual report 2017

Hyprop Investments Limited

Integrated annual report and consolidated financial statements

2017

Independent auditor’s report

to the shareholders of Hyprop Investments Limited

for the year ended 30 June 2017

Report on the audit of the consolidated financial

statements

Opinion

We have audited the consolidated financial statements of Hyprop

Investments Limited (the group) set out on pages 95 to 142, which

comprise the statement of financial position at 30 June 2017, and the

statement of profit or loss and other comprehensive income, statement

of changes in equity and statement of cash flows for the year then ended,

and notes to the consolidated financial statements, including a summary

of significant accounting policies.

In our opinion, the consolidated financial statements present fairly, in all

material respects, the consolidated financial position of Hyprop

Investments Limited at 30 June 2017, and its consolidated financial

performance and consolidated cash flows for the year then ended in

accordance with International Financial Reporting Standards and the

requirements of the Companies Act of South Africa.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the

current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters.

Basis for opinion

We conducted our audit in accordance with International Standards on

Auditing (ISA). Our responsibilities under those standards are further

described in the auditor’s responsibilities for the audit of the consolidated

financial statements section of our report.

We are independent of the group in accordance with the Independent

Regulatory Board for Auditors Code of Professional Conduct for

Registered Auditors (IRBA Code) and other independence requirements

applicable to performing audits of consolidated financial statements in

South Africa.

We have fulfilled our other ethical responsibilities in accordance with the

IRBA Code and in accordance with other ethical requirements applicable

to performing audits in South Africa. The IRBA Code is consistent with the

International Ethics Standards Board for Accountants Code of Ethics for

Professional Accountants (Parts A and B). We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Valuation of investment property

Refer to the accounting policies in note 1.10, the key estimations and uncertainties in note 1.24 and note 2 to the consolidated financial statements.

Key audit matter

How this matter was addressed in our audit

The group’s most significant asset is its investment property portfolio.

Investment property is measured at fair value, with changes in fair value

recognised in profit or loss for the year.

The valuation of the group’s investment properties involves significant

judgements made by management using the advice of external valuers,

particularly those around the selection of valuation models, current

market conditions and rental levels.

The valuation exercise also relies on the completeness and accuracy of

the underlying lease and financial information provided to the valuers by

management.

Due to the magnitude of the investment property portfolio held and the

significance of the judgements made in measuring the investment

property at fair value, this matter was consider to be a key audit matter.

Our response to the key audit matter included the following audit procedures,

among others:

■■

We assessed the competence, objectivity and integrity of the external

valuers. This assessment included but was not limited to assessing their

professional qualifications, experience and independence from the group

■■

Through discussions with the external valuers, we obtained an

understanding of:

– The valuation process adopted

– The significant assumptions used and critical judgement areas in the

valuation process, including uncontracted revenue, vacancy profiles

and capitalisation rates.

Based on this understanding, we evaluated the work of the external valuers

by performing the following:

■■

For certain properties where there was a significant change in value from

the prior year, challenging the assumptions used by the valuer and

assessing whether the assumptions were in line with industry assumptions

and market indicators

■■

For a sample of properties, performing procedures to corroborate the

information provided to the valuers by management. These procedures

included but were not limited to the following:

– Agreeing the forecast cash flows to the contracted revenue in the

underlying leases

– Agreeing growth rates in the models to the escalation rates in

underlying leases

■■

We considered the adequacy and completeness of the disclosures

associated with investment property valuation.