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Estimation of fair values
The following summarises the signifcant methods and assumptions used in estimating the fair values of fnancial instruments of the
Group:
Derivative fnancial instruments
The fair value of interest rate swaps and cross currency swaps are based on valuations provided by the fnancial institutions that are
the counterparties to the transactions. These quotes are tested for reasonableness by discounting estimated future cash fows based
on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
Finance lease receivable
Fair value, which is determined for disclosure purposes for fnance lease receivable, is calculated based on the present value of future
principal and interest cash fows, discounted at market interest rate for instruments with similar maturity, repricing and credit risk
characteristics at the reporting date.
Investment in debt securities
The fair value of debt securities is determined using a trinomial option pricing valuation technique which involves mainly the use of
market-based bond yields, volatility rates, discount rates and other assumptions at the reporting date.
Term loans and short term borrowings
The carrying amounts of interest-bearing borrowings which are repriced within 3 months from the balance sheet date approximate
the corresponding fair values.
Medium term notes
The fair values of the medium term notes relating to the $125.0 million MTN 2 and $200.0 million MTN 4 were obtained from market
quotes.
The fair value of JPY9.6 billion MTN 3 is calculated based on the present value of future principal and interest cash fows, discounted
at the market interest rate of instruments with similar maturity, repricing and credit risk characteristics at the reporting date.
Collateral loan
The fair value of the collateral loan approximates the fair value of the ECS issued by Ruby Assets, which is used as a proxy for
the purpose of determining the fair value of the collateral loan as the key features of the two instruments are identical. Valuation
adjustments, if signifcant, are made to account for the differences in features between the collateral loan and the ECS. The fair value
of the ECS was obtained from market quotes.
Security deposits and deferred payment
The fair values of security deposits and deferred payment are calculated based on the present value of future cash outfows, discounted
at the market interest rate at the reporting date.
Other fnancial assets and liabilities
The carrying amounts of fnancial assets and liabilities with a maturity of less than one year (including trade and other receivables,
cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values because of the short period
to maturity. All other fnancial assets and liabilities approximate their fair values as at balance sheet date.
NOTES TO THE FINANCIAL STATEMENTS
ASCENDAS REAL ESTATE INVESTMENT TRUST
ANNUAL REPORT FY11/12
178
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