BIMB Integrated Annual Report 2017

16. INVESTMENT PROPERTIES (CONTINUED) Valuation processes applied by the Group and the Company for Level 3 fair value The Group’s investment properties were valued by independent professional valuer firms, using the comparison, cost and investment methods of valuations, where applicable. In the comparison method approach, the sales and listings of comparable properties within nearby locations are compiled. From the compiled data, adjustments are made by the valuers between the subject property and those similar properties. The adjustments made are in relation to location, size and shape of the lot, physical features, legal and legislative constraints, building design and condition, time element, planning provision, improvements and renovation works made, if any, surrounding developments, facilities and amenities available and other factors that may affect the value of the subject property. These adjustments are therefore subject to uncertainties such as property market outlook, potential increases in rental rates and general economic conditions. In the cost method approach, the indication of values consists of the sum of the present worth of the improvement value. For the valuation of the improvements, the valuers have considered the following: (i) Cost of replacement of the building in accordance with current trend of market prices for materials, labour, contractor’s overhead, profit and fees; (ii) Accrued depreciation as evidenced by the observed condition and present and prospective serviceability in comparison with new units of like kind; and (iii) Extent, character and utility of the property. The investment method is the capitalisation of net rent from a property. Net rent is the residue of gross annual rent less annual expenses (outgoings) required to sustain the rent with allowance for void and management fees. The external valuers have considered the results of all these three methods in their valuation and applied professional judgement in the selection of the fair value of these investment properties. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 213 Overview Value Creation Accountability Financial Statements Sustainability Performance Data Shareholders Information 21 st AGM Information Management Discussion & Analysis S s