N o t e s t o t h e f i n a n c i a l s t a t e m e n t s
Year ended 31 March 2015
33 Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and
non–financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based
on the following methods. When applicable, further information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
(i)
Investment properties and property held for sale
Investment properties and property held for sale are stated at fair values based on valuations by independent
professional valuers with appropriate recognised professional qualifications and recent experience in the location and
category. In determining the fair value, the valuers have used valuation methods which involve certain estimates.
The Manager has exercised its judgement and is satisfied that the valuation methods and estimates are reflective of
the current market conditions.
The fair values are based on open market values, being the estimated amount for which a property could be
exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction
after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
The independent professional valuers have considered valuation techniques including direct comparison method,
capitalisation approach and discounted cash flows in arriving at the open market value as at the reporting date.
The direct comparison method involves the analysis of comparable sales of similar properties and adjusting the sale
prices to that reflective of the investment properties. The capitalisation approach capitalises an income stream into
a present value using a market-corroborated capitalisation rate. The discounted cash flows method involves the
estimation of an income stream over a period and discounting the income stream with an expected internal rate
of return.
(ii)
Derivative financial instruments
The fair value of interest rate swaps and cross currency swaps are based on valuations provided by the financial
institutions that are the counterparties to the transactions. These quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a
similar instrument at the reporting date.
(iii)
Finance lease receivables
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal
and interest cash flows, discounted at market interest rate for instruments with similar maturity, repricing and credit
risk characteristics at the reporting date.
(iv)
Investment in debt securities
The fair value of debt securities is determined using an option pricing valuation technique which involves mainly the
use of market–based equity and debt discount rates and other assumptions at the reporting date.
(v)
Security deposits
The fair values of security deposits are calculated based on the present value of future cash outflows, discounted at
the market interest rate at the reporting date.
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