NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 41 FINANCIAL INSTRUMENTS (CONT’D) (v) Accounting classifications and fair values (cont’d) Measurement of fair values Valuation techniques and significant unobservable inputs The following table shows the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used. Financial instruments measured at Level 3 fair value Type Valuation techniques Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Unquoted debt investments – mandatorily at FVTPL Discounted cash flows: The valuation model considers the present value of the expected future payments, discounted using a risk-adjusted discount rate. Discount rate: 2023: Not applicable 2022: 12% The estimated fair value would increase/(decrease) if the discount rate was lower/ (higher). Unquoted equity investments – at FVOCI The fair value is calculated using the net asset value (NAV) of the investee entity adjusted for the fair value of the underlying properties, where applicable. A discount is applied to take into consideration the non-marketable nature of the investment, where applicable. NAV Discount rate: 2023: 20% 2022: 20% The estimated fair value would increase/(decrease) if the NAV was higher/(lower). The estimated fair value would increase/(decrease) if the discount rate was lower/ (higher). Unquoted equity investments – mandatorily at FVTPL The fair value is calculated using the NAV of the investee entity adjusted for the fair value of the underlying properties, where applicable. NAV The estimated fair value would increase/(decrease) if the NAV was higher/(lower). The fair value is calculated using the market approach of weighted price-to-sales multiples of comparable companies. A discount is applied to take into consideration the non-marketable nature of the investment, where applicable. Price-to-sales multiple: 2023: 8.1 times 2022: 8.0 times Discount rate: 2023: 20% 2022: 20%. The estimated fair value would increase/(decrease) if the priceto-sales multiple was higher/ (lower). The estimated fair value would increase/(decrease) if the discount rate was lower/ (higher). 41 FINANCIAL INSTRUMENTS (CONT’D) (v) Accounting classifications and fair values (cont’d) Measurement of fair values (cont’d) Financial instruments measured at Level 2 fair value Unquoted debt investments – mandatorily at FVTPL The fair value of unquoted debt investments are calculated based on the present value of the expected future payments, discounted using a risk-adjusted discount rate. Financial derivatives The fair values of forward exchange contracts, cross-currency swaps and interest rate swaps are based on banks’ quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. Financial instruments not measured at fair value Interest-bearing borrowings The fair value of borrowings which reprice at the intervals of six months or less determined for disclosure purposes are calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Transfers between levels in the fair value hierarchy The Group and Company did not reclassify any investments between various levels in the fair value hierarchy during the year. FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 249 248
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