Page 135 - SAR141018_Forterra AR 2013

FORTERRA
ANNUAL REPORT 2013
NOTES TO THE
FINANCIAL STATEMENTS
133
30 DETERMINATION OF FAIR VALUES (CONTINUED)
Investment properties
The fair values of investment properties 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.
The valuations are prepared by considering the market values of comparable properties (direct
comparison approach) and the aggregate of the estimated cash flows expected to be received
from renting out the property (discounted cash flow approach). 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.
The fair values of the investment properties are derived based on the approaches described in
Note 4.
Unit-based payment transactions
The fair value of the unit options is measured using the Binomial option pricing method.
Measurement inputs include the unit price on the measurement date, the exercise price of the unit
option, expected volatility (based on an evaluation of the historical volatility of the Trust’s unit
price, particularly over the historical period commensurate with the expected term), expected
term of the unit option (based on historical experience and general option holder behaviour),
expected distribution, and the risk-free interest rate (based on government bonds). Service and
non-market performance conditions attached to the transactions are not taken into account in
determining fair value.