272 MKH BERHAD | ANNUAL REPORT 2023 46. FAIR VALUE HIERARCHY (CONT’D) The estimated fair value would increase/(decrease) if: • E stimated rental/average rental rate per square feet per month were higher/(lower) • E stimated price per parking bay per month were higher/(lower) • E stimated outgoings per square feet per month lower/(higher) • O utgoings rate lower/(higher) • V oid rate lower/(higher) • T erm yield rate lower/(higher) • R eversionary yield rate lower/(higher) • S inking fund rate lower/(higher) • C onstruction price per square feet higher/(lower) Direct comparison method Under the direct comparison method, a property’s fair value is estimated based on comparison of current prices in an active market for similar properties in the same location and condition and where necessary, adjusting for location, accessibility, visibility, time, terrain, size, present market trends and other differences. Fair value of properties derived using direct comparison method have been generally included in Level 3 fair value hierarchy due to the adjustments mentioned above. The most significant input into this valuation approach is price per square feet of comparable properties. Investment method In the investment method of valuation, the projected net income and other benefits that the subject property can generate over the life of the property is capitalised at market derived term yields to arrive at the present market value of the property. Net income is the residue of gross annual rental less annual expenses (outgoings) required to sustain the rental with allowance for void. Cost method of valuation In the cost method of valuation, the market value of the subject property is the sum of the market value of the land and building. The value of the building is assumed to have a direct relationship with its cost of construction. The cost of construction is then adjusted to allow for cost of finance, profit and demand to reflect its profitable present market value. Valuation processes applied by the Group The fair value of land and buildings under property, plant and equipment in 2020 was determined by external, independent property valuers, having appropriate recognized professional qualifications and recent experience in the location and category of property being valued. The Group revalues its land and buildings every five years or at shorter intervals whenever the fair value of the said assets is expected to differ substantially from the carrying amounts. The fair value of investment properties is determined by external, independent property valuers, having appropriate recognized professional qualifications and recent experience in the location and category of property being valued. The independent professional valuer provides the fair value of the Group’s investment property annually. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2023
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