ANNUAL REPORT 2008 - Gorenje Group

152
2008
(iii) Investment property
An external, independent valuation company, having appropriate recognised professional qualifications
and recent experience in the location and category of property being valued, values the
Company’s investment property portfolio every six months. The fair values are based on market
values, being the estimated amount for which a property could be exchanged on the date of the
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.
In the absence of current prices in an active market, the valuations are prepared by considering the
aggregate of the estimated cash flows expected to be received from renting out the property. A
yield that reflects the specific risks inherent in the net cash flows then is applied to the net annual
cash flows to arrive at the property valuation.
Valuations reflect, when appropriate: the type of tenants actually in occupation or responsible for
meeting lease commitments or likely to be in occupation after letting vacant accommodation, and
the market’s general perception of their creditworthiness; the allocation of maintenance and insurance
responsibilities between the Company and the lessee; and the remaining economic life of the
property. When rent reviews or lease renewals are pending with anticipated reversionary increases,
it is assumed that all notices, and when appropriate counter-notices, have been served validly
and within the appropriate time.
(iv) Trade receivables
The fair value of trade receivables is estimated as the present value of future cash flows, discounted
at the market rate of interest at the reporting date.
(v) Derivatives
The fair value of derivatives is estimated as the present value of future cash flows, taking into account
the market price of equivalent derivatives at the reporting date and by applying the market
interest rates for equivalent derivatives at the reporting date.
(vi) Non-derivative financial liabilities
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. In respect of the liability component of convertible notes, the market rate of interest is determined
by reference to similar liabilities that do not have a conversion option. For finance leases the
market rate of interest is determined by reference to similar lease agreements.
5. Financial risk management
In respect of financial risk management, the internal financial policies comprising the bases for efficient
and systematic risk management were observed in 2008. The objectives of risk management
are:
• to achieve stability of operations and to reduce risk exposure to an acceptable
level,
• to increase the value of companies and the impact on their financial standing,
• to increase financial income and/or decrease financial expenses, and
• to nullify and/or decrease the effects of exceptionally damaging events.
In the Company, the following key types of financial risks have been defined:
Financial risks
Credit risk
Currency risk
Interest rate risk
Liquidity risk