CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2021 FINANCIALS 212 213 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 YEAR ENDED 31 DECEMBER 2021 39 ACQUISITION OF AND LOSS OF CONTROL IN SUBSIDIARIES, AND CHANGES IN INTERESTS IN SUBSIDIARIES WITHOUT LOSS OF CONTROL (CONT’D) (I) Acquisition of subsidiaries (cont’d) 2021 (cont’d) Recognised amounts $’000 Cash flows relating to the acquisition Consideration for equity interest 174,384 Shareholder loans assumed 172,969 Total consideration 347,353 Less: Cash acquired (5,564) Add: Consideration not yet paid (42) Total net cash outflow 341,747 Measurement of fair values The valuation techniques used for measuring the fair value of material assets acquired and liabilities assumed as part of business combinations were as follows: Assets acquired Valuation technique Property, plant and equipment and investment properties Direct comparison, income capitalisation, standardised land value adjustment and residual methods: The direct comparison method involved the analysis of comparable sales of similar assets and adjusting the sale prices to that reflective of the properties. The income capitalisation method capitalises an income stream into a present value using revenue multipliers or single-year capitalisation rates. The standardised land value adjustment method considers the price of standard land in the current situation of development and utilisation, under normal market conditions within legal maximum use term as at a specific date, that is assessed and approved by the local government. The residual method involves deducting estimated costs to complete as of valuation date and other relevant costs from gross development value of the proposed development assuming satisfactory completion and accounting for developer profit. Development properties Direct comparison, standardised land value adjustment and residual methods: The direct comparison method involves the analysis of comparable sales of similar assets and adjusting the sale prices to that reflective of the properties. The standardised land value adjustment method considers the price of standard land in the current situation of development and utilisation, under normal market conditions within legal maximum use term as at a specific date, that is assessed and approved by the local government. The residual method involves deducting the estimated costs to complete as of valuation date and other relevant costs from gross development value of the proposed development assuming satisfactory completion and accounting for developer profit. 39 ACQUISITION OF AND LOSS OF CONTROL IN SUBSIDIARIES, AND CHANGES IN INTERESTS IN SUBSIDIARIES WITHOUT LOSS OF CONTROL (CONT’D) (I) Acquisition of subsidiaries (cont’d) 2021 (cont’d) Assets acquired Valuation technique Interest-bearing borrowings The fair value of borrowings is estimated as the present value of future principal and interest cash flows, discounted at market rate of interest at the acquisition date. Negative goodwill Negative goodwill arising from the acquisition of Shenzhen Tusincere has been recognised as follows: Total $’000 Consideration transferred 174,384 Non-controlling interests, based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquiree 173,951 Fair value of identifiable net assets (383,888) Negative goodwill (35,553) The negative goodwill arising from the acquisition of Shenzhen Tusincere has been recognised in “other income” in the Group’s profit or loss. The negative goodwill was attributed to the competitive pricing negotiated with the joint venture party which was trying to improve its overall liquidity, and two other third parties. (II) Loss of control in subsidiaries 2020 (a) On 6 March 2020, the Group sold its 75.1% equity interest in Sceptre Hospitality Resources LLC (SHR) for a sale consideration of $44.3 million (US$32.5 million). (b) On 30 October 2020, the Group, through its indirect, non-wholly-owned subsidiary, CDLHT, sold Novotel Brisbane to a third party for a total consideration of $65.3 million (A$68.0 million). (c) On 19 November 2020, the Group, through its indirect wholly-owned subsidiary, CDL China (Shanghai) Consulting Co., Ltd, sold its 100% equity interest in Chongqing Jungao Enterprise Management Co., Ltd., (Chongqing Jungao) for a consideration of $13.8 million (RMB67.9 million). The Group recognised a total gain on the above transactions of approximately $32.9 million.
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