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Notes to the Financial Statements
26. Capital and financial risk management (Cont'd)
Financial risk management (Cont'd)
Estimation of fair value
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments of the Group and Trust.
Financial derivatives
The fair value of foreign exchange derivatives is based on their listed market price, if available. If a listed market
price is not available, then fair value is estimated by discounting the difference between the contractual forward
price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based
on government bonds).
The fair value of interest rate derivatives is based on broker quotes. 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 measurement date.
Interest-bearing borrowings
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.
Other financial assets and liabilities
The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and
other receivables, cash and cash equivalents, trade and other payables and security deposits) are assumed to
approximate their fair values because of the short period to maturity. All other financial assets and liabilities are
discounted to determine their fair values.
Interest rates used in determining fair values
The interest rates used to discount estimated cash flows, where applicable, are based on the forward yield curve
as at 31 December 2012 plus an adequate constant credit spread, and are as follows:
2012 2011
% p.a. % p.a.
Interest-bearing borrowings 1.02 – 7.04 0.99 – 7.04
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