27. CAPITAL AND FINANCIAL RISK MANAGEMENT
(continued)
Accounting classifications and fair values
(continued)
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.
Investment Properties
Refer to Note 4 on the valuation methods used to arrive at the fair value of investment properties.
Financial derivatives
The fair value of non-deliverable forwards is based on banks’ quotes. These quotes are tested
for reasonableness 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 swaps is based on banks’ 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 current security deposits) are assumed to approximate their fair values because of the short
period to maturity. All other financial assets and liabilities (non-current security deposits) 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 2014 plus an adequate constant credit spread, and are
as follows:
2014
2013
% p.a.
% p.a.
Interest-bearing borrowings
1.31-6.40
1.04-6.77
Security deposits
1.84
1.85
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