Annual Report 2016
135
Financial Section
4 Financial Risk Management and Fair Value Estimation
(continued)
(e) Fair value estimation
(continued)
(ii)
(continued)
The following table presents the changes in level 3 instruments for the year ended 30 June 2015:
Available-
for-sale
financial
assets
Financial
assets at
fair value
through profit
or loss
Derivative
financial
assets
Derivative
financial
liabilities
HK$m
HK$m
HK$m
HK$m
At 1 July 2014
2,822.9
405.6
58.8
(35.6)
Additions
861.0
317.5
–
–
Net gain recognised in the consolidated
statement of comprehensive income/
income statement
284.9
123.9
–
5.5
Disposals
(236.0)
–
–
–
At 30 June 2015
3,732.8
847.0
58.8
(30.1)
The following unobservable inputs were used to determine the fair value of the available-for-sale financial
assets included in level 3.
2016
Fair value
2015
Fair value
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs
HK$m
HK$m
Property development industry
7,079.2
– Income approach
Expected rate of return
9.395%–
10.341%
Property investment industry
1,735.9
1,952.8 Net asset value (note)
N/A
N/A
Entertainment industry
–
516.1 Market comparable
approach
Enterprise value/earnings
before interest and tax
multiple
(2015:
9.37 times–
25.31 times)
Property development industry
–
735.9 Residual method
Development cost,
developer’s profit and
risk margin
N/A
Others
873.5
528.0
9,688.6
3,732.8
Note: The Group has determined that the reported net asset value represents fair value at the end of the reporting period.
5 Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated by the Group and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstance.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant effect on carrying amounts
of assets and liabilities are as follows:
(a) Fair value of available-for-sale financial assets and financial assets at fair value through
profit or loss
The fair value of available-for-sale financial assets and financial assets at fair value through profit or loss that are not
traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a
variety of methods (such as discounted cash flow model and option pricing models) and evaluates, among other
factors, whether there is significant or prolonged decline in the fair value below the cost of an investment; and the
financial health and short-term business outlook for the investee and historical price volatility of these investments.
The key assumptions adopted on projected cashflow are based on management’s best estimates.