33 FAIR VALUE OF ASSETS AND LIABILITIES
(a) Determining fair value
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
and processes. Where applicable, further information about the assumptions made in
determining fair values is disclosed in the notes specific to that asset or liability.
(i) Serviced residence properties
The Group’s investment property portfolio is valued by independent valuers every six
months. 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 wherein the
parties had each acted knowledgeably and without compulsion. The valuers have
considered the discounted cash flows method in arriving at the open market value as
at the balance sheet date. In determining the fair value, the valuers have used
valuation techniques which involve certain estimates. The key assumptions used to
determine the fair value of serviced residence properties include market-
corroborated discount rate and terminal capitalisation rate.
The valuation of the Group’s investment property portfolio is discussed with the Audit
Committee and Board of Directors in accordance with the Group’s reporting policies.
(ii) Assets held for sale
The Group’s assets held for sale are valued by an independent external valuer. The
valuer has considered the direct comparison and income capitalisation approaches
in arriving at the open market value as at the balance sheet date. In determining the
fair value, the valuer used valuation techniques which involve certain estimates. The
key assumptions used to determine the fair value of assets held for sale include
market-corroborated capitalisation rate.
(iii) Financial derivatives
The fair values of interest rate swaps and interest rate caps are based on broker
quotes. These quotes are tested for reasonableness by discounting estimated future
cash flows based on terms and maturity of each contract and using market interest
rates for a similar financial instrument at the measurement date.
(iv) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the
present value of future principal and interest cash flows, discounted at the market
rate of interest at the reporting date.
(v) Intra-group financial guarantees
The value of financial guarantees provided by the Trust to its subsidiaries is
determined by reference to the difference in the interest rates, by comparing the
actual rates charged by the bank with these guarantees made available, with the
estimated rates that the banks would have charged had these guarantees not been
available.
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