Inventory and land designed for development
valuation
The inventory and land designed for development in
the accompanying annual consolidated financial
statements of the Ronson Development SE as at 31
December 2020 is PLN 710.2 million (as at 31
December 2019: PLN 762.4 million), which stands
for 76 % of the total assets of the Group as of 31
December 2020 (31 December 2019: 81%).
Inventory and land designed for development
consists of capitalized expenses of development
projects of multi-family residential real estate at the
initial stage, projects under construction and
completed projects.
Inventory, that included projects under construction
and completed projects, is measured at the lower of
cost and net realizable value.
The cost of Inventory
included, but was not limited to, land acquisition
cost, perpetual usufruct value, construction costs,
planning and design costs, borrowing costs incurred
during the construction period and other costs
directly attributed to the project.
Land designed for development
included the
expenditures incurred at the investment planning
stage and is measured at the purchase price of the
land, increased by capitalized costs incurred in
connection with the preparation of the project, not
higher than the net
realizable value.
The Group estimated the net realizable value and
write off of inventory and land designed for
development depending on numerous assumptions,
such as, amongst others, the estimated sales prices
per square meter, the estimated construction costs
and the expected timing of sales of the units.
The Management Board of the Parent Company
assessed potential write-offs of the inventory and
land designed for development separately for each
project.
Considering the inherent risk of uncertainty related
to significant judgments and estimates made by the
Management Board and the materiality of the
Our audit procedures comprised in particular:
a)
evaluation of adopted accounting policies in respect
of valuation of inventory and land designed for
development in terms of compliance with the
appropriate financial reporting standards;
b)
understanding and assessing the process of
valuation of Inventory and land designed for
development, including calculation of net realizable
value;
c)
identification of controls in this area;
d)
inquiry with Management Board of the Parent
Company regarding key estimates and judgments
in the area of valuation of inventory and land
designed for development, benchmarking of key
assumptions to similar projects on the market or
actual selling prices received on completed projects
by the Group;
e)
using external PwC valuation experts for
assessment the assumptions adopted by the Group
to determine the net realizable value;
f)
evaluating the correctness and completeness of
disclosures in respect of inventory and land
designed for development in the consolidated
financial statements.