NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2014
43 FAIR VALUE OF ASSETS AND LIABILITIES (CONT’D)
C.
Level 2 fair value measurements
The following is a description of the valuation techniques and inputs used in the fair value measurements for assets and
liabilities that are categorised within Level 2 of the fair value hierarchy:
Property, plant and equipment (note 14)
: The comparison method that considers the sales of similar properties that have
been transacted in the open market with adjustments made for differences in factors that affect value.
Investment properties (note 15)
: The valuations are based on the following methods:
(i)
The comparison method that considers the sales of similar properties that have been transacted in the open market
with adjustments made for differences in factors that affect value.
(ii)
The investment method that capitalises the net rent of the properties at a suitable rate of return. The net rent is
the balance sum after deducting service charge, property tax and a reasonable percentage for vacancy from the
gross rent. The value of the property is arrived at by capitalising this net rent at a suitable rate of return.
Derivatives (note 22): Forward
currency contracts, forward commodity contracts and interest rate swap contracts are
valued using a valuation technique with market observable inputs. These contracts are valued by financial institutions.
D.
Level 3 fair value measurements
i)
Information about significant unobservable inputs used in Level 3 fair value measurements
The following table shows the information about fair value measurements using significant unobservable inputs
(level 3).
Description
Fair value
Valuation
techniques
Significant
unobservable
inputs
Range
Sensitivity of the input
to fair value
$’000
Recurring fair value
measurements
Property, plant and
equipment
31 December 2014
Land and buildings
17,144
Market
comparable
approach/
Depreciated
replacement
cost
Difference in
location, time
factor and size
-15.0% to
10.0%
Every 1% increase/
(decrease) in the
adjustments would
result in a decrease/
(increase) in fair value
by $151,000
31 December 2013
Land and buildings
16,586
Market
comparable
approach/
Depreciated
replacement
cost
Difference in
location, time
factor and size
-15.0% to
10.0%
Every 1% increase/
(decrease) in the
adjustments would
result in a decrease/
(increase) in fair value
by $124,000
159
THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
