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GHL Systems Berhad
(293040-D)
Annual report 2015
Notes to the Financial Statements
31 December 2015 (continued)
35. FINANCIAL INSTRUMENTS (continued)
(c) Methods and assumptions used to estimate fair value
The fair values of financial assets and financial liabilities are determined as follows:
(i) Financial instruments that are not carried at fair value and whose carrying amounts are a
reasonable approximation of fair value
The carrying amounts of financial assets and liabilities, such as trade and other receivables under
current assets, trade and other payables and borrowings, are reasonable approximation of fair
value, either due to their short-term nature or that they are floating rate instruments that are re-
priced to market interest rates on or near the end of the reporting period.
The carrying amounts of the current position of hire purchase creditors and borrowings are
reasonable approximations of fair values due to the insignificant impact of discounting.
The fair value of these borrowings has been determined using discounted cash flows technique.
The discount rates used are based on the risk-free MGS rates with a credit spread added to reflect
the default risk of the Group.
(ii) Non-current amounts owing by subsidiaries and hire purchase creditors
The fair value of these financial instruments are estimated by discounting expected future
cash flows at market incremental lending rate for similar types of lending, borrowing or leasing
arrangements at the end of each reporting period.
(iii) Available-for-sale investment
The fair value of the investments are determined by reference to the exchange quoted market
bid price at the close of the business at the end of the reporting period.
(d) Fair value hierarchy
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
Fair values of non-derivative financial liabilities, which are 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 end of the reporting period. In respect of the borrowings, the market rate
of interest is determined by reference to similar borrowing arrangements.
Level 3 fair value measurements are those derived from inputs for the asset or liability that are not
based on observable market data (unobservable inputs).