44. FINANCIAL INSTRUMENTS BY CATEGORY (Continued)

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1 Franshion Properties (China) Limited Annual Report FINANCIAL INSTRUMENTS BY CATEGORY The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows: Loans and Loans and receivables receivables Financial assets Due from subsidiaries 15,631,655 5,640,277 Financial assets included in prepayments, deposits and other receivables (note 25) 139 6,716 Due from related parties 1, Cash and cash equivalents 966,711 3,351,886 16,599,513 8,999,597 Financial liabilities at amortised cost HK$ 000 Financial liabilities at amortised cost HK$ 000 Due to subsidiaries 15,197,718 11,377,681 included in other payables and accruals (note 31) 12,002 8,900 Due to related parties 3,334,435 other borrowings 5,711,833 2,492,608 24,255,988 13,879,189 The carrying amounts and fair values of the s and the s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows: Carrying amounts Fair values Financial assets Other financial assets (current) call option 108, ,748 Other financial assets (non-current) 42,629 41,335 42,629 41, ,377 41, ,377 41,335 other borrowings 35,806,135 28,275,422 35,936,278 28,613,668

2 254 Annual Report 2013 Franshion Properties (China) Limited Carrying amounts Fair values other borrowings 5,711,833 2,492,608 5,711,833 2,492,608 Management has assessed that the fair values of cash and cash equivalents, pledged deposits, restricted bank balances, trade receivables, amounts due from non-controlling shareholders, financial assets included in prepayments, deposits and other receivables, financial product included in other financial assets, trade payables, financial liabilities included in other payables and accruals, amounts due from subsidiaries, and amounts due from/to related parties approximate to their carrying amounts largely due to the short term maturities of these instruments. The s corporate finance team is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: The fair values of interest-bearing bank and other borrowings except for notes have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The fair value of notes is based on quoted market prices. The s own non-performance risk for interest-bearing bank and other borrowings as at was assessed to be insignificant. The fair value of call option included in current other financial assets has been estimated using residual method. Residual method measures the fair value of the property by deducting the estimated development costs including outstanding construction costs, marketing expense and developer profit from the gross development value assuming that it was completed as of the valuation date. The fair value of noncurrent other financial assets has been estimated using a discounted cash flow valuation model based on assumptions that are not supported by observable market prices or rates. The valuation requires the directors to make estimates about the expected future cash flows including expected future dividends. The directors believe that the estimated fair values resulting from the valuation technique, which are recorded in the consolidated statement of financial position, are reasonable and that they were the most appropriate values at the end of the reporting period.

3 Franshion Properties (China) Limited Annual Report Below is a summary of significant unobservable inputs to the valuation of financial instruments: Valuation techniques Significant unobservable inputs Sensitivity of the input to fair value Other financial assets Non-current balance Discounted cash flow method Discount rate for cash flows 5% increase (decrease) in discount rate would result in decrease (increase) in fair value by HK$2,754,000 Other financial assets Current balance Call option Residual method Average selling price per sqm for the property, taking into account of location and properties quality 5% increase (decrease) in average selling price would result in increase (decrease) in fair value by HK$9,359,000 Construction cost, taking into account of management s experience and estimated budget 5% increase (decrease) in construction cost would result in decrease (increase) in fair value by HK$3,484,000

4 256 Annual Report 2013 Franshion Properties (China) Limited Fair value hierarchy The following tables illustrate the fair value measurement hierarchy of the s financial instruments: Assets measured at fair value: significant unobservable inputs (Level 3) Other financial assets (current) call option 108,748 Other financial assets (non-current) 42,629 41, ,377 41,335 The s assets were neither categorised in Level 1 nor Level 2 as at (2012: Nil). The movements in fair value measurements in Level 3 during the year are as follows: Other financial assets: At 1 January 41,335 Purchases 108,748 41,335 Exchange realignment 1,294 At 31 December 151,377 41,335 During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities (2012: Nil). The did not have any financial assets measured at fair value as at (2012: Nil). Liabilities measured at fair value: The and the did not have any financial liabilities measured at fair value as at 31 December 2013 (2012: Nil). Assets for which fair value are disclosed: The and the did not have any financial assets that were not measured at fair value in the statement of financial position but for which the fair value is disclosed as at (2012: Nil).

5 Franshion Properties (China) Limited Annual Report Liabilities for which fair value are disclosed: As at other borrowings 11,708,625 24,227,653 35,936,278 As at 31 December 2012 other borrowings 8,044,542 20,569,126 28,613,668 As at other borrowings 5,711,833 5,711,833 As at 31 December 2012 other borrowings 2,492,608 2,492,608