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37.
DETERMINATION OF FAIR VALUES
A number of the group’s accounting policies and disclosures require the determination of fair values, for both financial and non-financial
assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.
Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset
or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market
value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a
willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without
compulsion. The market values of other assets are based on the quoted market prices for similar items.
Intangible assets
The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the
assets.
Inventory
The fair value of inventory acquired in a business combination is determined based on its estimated selling price in the ordinary course of
business less the estimated costs of completion and sale, and a reasonable profit margin based on the efforts required to complete and sell
the inventory.
Forward exchange contracts
The fair value of forward exchange contracts is based on their market prices.
Borrowings
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to
similar lease agreements. The carrying value of the bank overdrafts is the fair value.
Share-based payments
The fair value of the share appreciation right awards are measured using a binomial method. Measurement inputs include share price at
measurement date, exercise price of the instrument, expected volatility (based on the historic volatility), option life, distribution yield and the
risk-free interest rate (based on national South African government bonds).
The fair value of the conditional share plan awards are measured using a Monte Carlo method, as it best captures the path-dependent
nature and specific features of these awards. The path dependency of the share award arises from the interaction between dividends
and the performance hurdle in the valuation model, as well as the dependency of the valuation on the level of achievement of the vesting
conditions at the performance period end dates. The evolution of Bidcorp and the peer group members’ total shareholder return prices are
modelled using the market-accepted log-normal share price process taking into account input parameters which are based on historical
share price data.
38.
SUBSEQUENT EVENTS
Subsequent to year end, management has been through a legal mediation process with the perpetrators of the Logistics UK irregularities.
Bidcorp management remains optimistic that pursuant to legal action and insurance claims, potential recoveries arising from the
management irregularities will be forthcoming.
Other than the legal matter disclosed above, no other material subsequent events have arisen since June 30 2017.
39.
GOING CONCERN
The directors have made an assessment of the group’s ability to continue as a going concern and there is no reason to believe that the
group will not be a going concern in the year ahead.
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Annual integrated report 2017
Bid Corporation Limited