Hyprop Investments Limited Integrated annual report 2017

Notes to the consolidated

financial statements

continued

for the year ended 30 June 2017

134

Hyprop Investments Limited

Integrated annual report and consolidated financial statements

2017

34.

Financial instruments – Fair values and risk management

continued

B – Measurement

I. Financial instruments measured at fair value

The following tables show the valuation techniques used in measuring level 2 and 3 fair values, as well as the significant unobservable inputs used:

Type

Valuation technique

Significant

unobservable inputs

Inter-relationship between significant

unobservable inputs and fair value

measurement

Derivatives

Market comparison:

The valuation of the

derivative instruments was determined by

discounting the future cash flows using the

JIBAR or LIBOR swap curve. Similar contracts are

traded in active markets and the quotes reflect

the actual transactions in similar instruments.

Not applicable

Joint venture – Hystead

Limited (Hystead)

Discounted cash flow:

The valuation model

considers the present value of the net cash

flows expected to be generated by the

underlying shopping centres. The cash flow

projections include specific estimates for

10 years. The expected net cash flows are

discounted using a risk adjusted discount rate.

Annual growth rate

Exit cap rate

The estimated fair value would increase

(decrease) if:

■■

The annual growth rate were

higher (lower); or

■■

The exit cap rate were (higher) lower

II. Financial instruments not measured at fair value

Financial guarantee

Discounted cash flow:

The valuation model

considers the present value of net cash flows

expected to be incurred taking into account

estimated probabilities of default. The cash

flow projections include revenue from

investment properties, cost of servicing debt

and other operating expenses. Probabilities of

defaults are estimated using credit spreads

derived from the contractual spreads of the

underlying facilities. Expected cash flows are

discounted using a risk adjusted discount rate.

Annual growth rates,

credit spreads

The estimated fair value would increase

(decrease) if:

■■

The annual growth rates were

higher (lower); or

■■

The credit spread were

higher (lower)

Loans receivable

Amortised cost.

Not applicable

Trade and other receivables

Carrying values:

Due to the short-term nature

of receivables they are carried at the value

expected to be received within the next

12 months as discounting them over the months

to settlement would not yield substantially

different amounts. Their carrying value is

considered to reflect fair value.

Not applicable

Cash and cash equivalents

The carrying value of cash is considered to

reflect fair value.

Not applicable

Borrowings and payables

Amortised cost.

Not applicable

III. Transfers between levels 1 and 2

There were no transfers in either direction between levels 1 and 2 during the current or prior years.