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| Bidcorp Limited Annual integrated report 2016
32.
FINANCIAL INSTRUMENTS
(continued)
32.5 Fair values
(continued)
Fair value hierarchy
When measuring the fair value of an asset or a liability, the group uses market observable data as far as possible. Fair values are categorised
into different levels in a fair value hierarchy based on the inputs used in the valuation techniques categorised as follows:
■
■
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
■
■
Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (ie as prices) or
indirectly (ie derived from prices).
■
■
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities
not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Non-current
liabilities
Current assets
(liabilities)
R’000s
Puttable
non-
controlling
interests Investments
Vendors
for
acquisition
Total
Level 1
Level 2
Level 3
June 30 2016
Financial assets measured at
fair value
–
511 122
–
511 122
501 293
2 054
7 775
Financial liabilities measured at
fair value
(1 168 921)
–
(513 308) (1 682 229)
–
– (1 682 229)
June 30 2015
Financial assets measured at
fair value
–
26 163
–
26 163
–
12 277
13 886
Financial liabilities measured at
fair value
(913 638)
–
(558 315)
(1 471 953)
–
–
(1 471 953)
Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in measuring the puttable non-controlling interests and vendors for acquisition fair
values at June 30.
Valuation technique
Significant unobservable inputs
Inter-relationship between
significant unobservable inputs
and fair value measurement
The expected payments are determined by
considering the possible scenarios of forecast
EBITDA, the amount to be paid under each
scenario and the probability of each scenario.
The valuation models consider the present
value of expected payment, discounted using
a risk-adjusted discount rate.
– EBITDA growth rates: 10 – 23% (2015: 10 – 23%)
– EBITDA mutliples: 4,8x – 7x (2015: 4,8x – 7x)
– Risk-adjusted discount rate: 1,99% – 5,00%
(2015: 1,99%)
The estimated fair value would
increase (decrease) if:
– the EBITDA were higher (lower); or
– the risk-adjusted discount rate
were lower (higher).
33.
CAPITAL MANAGEMENT
The board of directors’ policy is to maintain a strong capital base so as to sustain future development of the businesses so that it can
continue to provide benefits to its shareholders.
There were no changes in the group’s approach to capital management during the year.
Notes to the consolidated financial statements
for the year ended June 30