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33.
FINANCIAL INSTRUMENTS
(continued)
33.4 Market risk
(continued)
33.4.3 Equity price risk
Equity price risk arises from investments classified as held-for-trading and available-for-sale (refer to note 18). Unlisted investments
comprise unlisted shares and loans which are classified as held-for-trading or available-for-sale, and are valued at fair value using a price
earnings (PE) model.
33.5 Fair values
The carrying amounts of all financial assets and liabilities approximate their fair values, with the exception of borrowings which have been
accounted for at amortised cost. The fair value of borrowings, together with the carrying amounts shown in the statement of financial
position, classified by class (being geographical location), are as follows:
2017
2016
Carrying
amount
R’000
Fair
value
R’000
Carrying
amount
R’000
Fair
value
R’000
Borrowings (refer to note 25)
Southern Africa and other Emerging Markets
2 325 575
2 325 575
2 136 266
2 136 156
Loans secured by lien over certain property, plant and
equipment in terms of financial leases and suspensive
sale agreements
6 679
6 679
5 349
5 349
Unsecured loans
2 318 896
2 318 896
2 130 917
2 130 807
United Kingdom and Europe
4 812 145
4 763 022
3 914 356
3 885 383
Loans secured by mortgage bonds over fixed property
54 651
54 651
78 436
78 436
Loans secured by lien over certain property, plant and
equipment in terms of financial leases and suspensive
sale agreements
435 000
435 000
279 016
279 016
Unsecured loans
4 322 494
4 273 371
3 556 904
3 527 931
Australasia
Unsecured loans
919 743
919 743
1 137 532
1 137 532
8 057 463
8 008 340
7 188 154
7 159 071
Unrecognised gain
49 123
29 083
The methods used to estimate the fair values of financial instruments are discussed in note 37. The interest rates used to discount cash
flows, in order to determine fair values, are based on market-related rates at June 30 2017 plus an adequate constant credit spread, and
range from 0,0% to 19,8% (2016: 0,0% to 18,2%).
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).
127
Annual integrated report 2017
Bid Corporation Limited