Page 107 - Forterra

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NOTES TO THE
FINANCIAL STATEMENTS
29 ESTIMATION OF FAIR VALUES
The methodologies and assumptions used in the estimation of fair values depend on the terms and
characteristics of the various assets and liabilities and include the following:
Financial instruments for which fair value is equal to the carrying value
These financial instruments include trade and other receivables, cash and cash equivalents, trade
and other payables, current portions of interest-bearing liabilities and interest-bearing liabilities with
floating interest rates. The carrying values of these financial instruments are an approximation of
the fair values because they are short-term in nature or re-priceable.
Investment properties
An external independent valuation company, having appropriate recognised professional
qualifications and experience in the location and category of property being valued, values the
Group’s investment properties at least once every year. The fair values are based on 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 and willingly.
In the absence of current prices in an active market, the valuations are prepared by considering the
aggregate of the estimated cash flows expected to be received from renting out the property. A
yield that reflects the specific risks inherent in the net cash flows is applied to the net annual cash
flows to arrive at the property valuation.
Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for
meeting lease commitments or likely to be in occupation after letting vacant accommodation, the
allocation of maintenance and insurance responsibilities between the Group and the lessee, and
the remaining economic life of the property. When rent reviews or lease renewals are pending with
anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-
notices, have been served validly and within appropriate time.
Non-current financial assets and liabilities
Fair value is calculated using discounted cash flow models, with the discount rate determined based
on benchmark rates for instruments with similar maturity and repricing plus a credit spread. In
determining the applicable credit spread, reasonable efforts have been made to determine whether
there has been a change in the credit risk associated with the financial asset or financial liability.