Notes to the Financial Statements For the financial year ended 31 December 2024 30 BUSINESS COMBINATIONS (continued) Measurement of fair value The valuation techniques used for measuring the fair value of the material assets acquired and liabilities assumed were as follows: Assets acquired and liabilities assumed Valuation technique Intangible assets Intangible assets mainly consist of franchise agreements for which independent valuation is conducted using the multi-period excess earnings method. The multi-period excess earnings method considers the present value of net cash flows expected to be generated from the agreements, by excluding any cash flows related to contributory assets. Other current assets and liabilities Other current assets and liabilities include trade and other receivables, cash and cash equivalents, trade and other payables, and other current liabilities. The fair values of these assets and liabilities are determined to approximate the carrying amounts since they are short term in nature. 31 FAIR VALUE OF ASSETS AND LIABILITIES (a) Determination of fair value The valuation methods and assumptions below are used to estimate the fair values of the Group’s significant classes of assets and liabilities. (i) Derivatives Forward currency contracts, cross currency swap contracts and interest rate swap contracts are valued using valuation techniques with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rate, interest rate curves and forward rate curves. (ii) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted using the market rate of interest at the reporting date. Fair value of quoted debt securities is determined based on quoted market prices. (iii) Other financial assets and liabilities The fair value of quoted securities is their quoted bid price at the reporting date. 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 and trade and other payables) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values. Where other valuation techniques, such as discounted cash flow technique are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market-related rate for a similar instrument. 164 CapitaLand Investment Limited Notes to the Financial Statements For the financial year ended 31 December 2024 31 FAIR VALUE OF ASSETS AND LIABILITIES (continued) (a) Determination of fair value (continued) (iv) Investment properties The Group’s investment property portfolio is valued by external and independent valuation companies on an annual basis. Independent valuation is also carried out on occurrence of acquisition of investment property. The fair values are based on open 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 wherein the parties had each acted knowledgeably and without compulsion. The valuers have considered valuation techniques, mainly including capitalisation approach, discounted cash flow approach and residual value method in arriving at the open market value as at the reporting date. In determining the fair value, the valuers have used valuation techniques which involve certain estimates. The key assumptions used to determine the fair value of investment properties include marketcorroborated capitalisation rate, discount rate and terminal yield rate, estimated cost to completion and gross development value. (v) Assets held for sale The fair value of the Group’s investment properties held for sale is either valued by an independent valuer or based on the agreed contractual selling price on a willing buyer willing seller basis, which approximate fair value. For investment properties held for sale valued by an independent valuer, the valuer has considered the discounted cash flow and income capitalisation approaches in arriving at the open market value as at the reporting date. In determining the fair value, the valuer used valuation techniques which involve certain estimates. The key assumptions used to determine the fair value of investment properties held for sale include market-corroborated capitalisation rate. (vi) Share-based payment transactions The fair values of employee performance share plan and restricted share plan are measured using valuation methodology described in note 19. Measurement inputs include the share price at grant date, expected volatility (based on an evaluation of the historical volatility of the Group’s and peer group’s share price), expected correlation of the Group’s return with those of peer group, expected dividends yield 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 the fair values. (b) Fair value hierarchy The Group categorises fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used. The different levels have been defined as follows. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). 165 Annual Report 2024
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