Page 238 - Full Book_24.4.2021

NOTES TO THE
FINANCIAL STATEMENTS

for the financial year ended 31 december 2020 (continUed)

16 INVESTMENT PROPERTIES (CONTINUED)
Level 3 fair value
level 3 fair value is estimated using unobservable inputs for the investment property.
the following table shows the valuation techniques used in the determination of fair values within level 3, as well as the
significant unobservable inputs used in the valuation models.
Valuation technique Significant Inter-relationship between
inteGrated annUal rePort 2020 comparison method: the valuation adjustment rate based on the the estimated fair value
significant unobservable inputs
unobservable inputs
and fair value measurement
would increase/(decrease) if:
comparable sales in the past
method consider the sales and listing
that was analysed by the national
of comparable properties recorded in the
– the rate were higher or lower
– the historical sales transaction value
Property information centre
area and adjustments are made between
the subject properties and those similar
properties. the adjustments are made
Property Services department,
in relation to location and accessibility, (naPic) under valuation and were higher or lower
ministry of finance malaysia.
size and shape of the lot, physical features,
232 legal and legislation constraints, building
design and condition, supply and demand,
building code and public restriction. - term yield the estimated fair value would
bimb holdinGS berhad 199701008362 (423858-X) that can accrue to the subject properties. lower or higher.
investment method: the valuation method
involves estimating the current rental income - reversionary yield
increase/(decrease) if the yield were
Valuation processes applied by the Group for Level 3 fair value
the Group’s investment properties were valued by independent professional valuer firms, using the comparison, cost and
investment methods of valuations, where applicable.

in the comparison method approach, the sales and listings of comparable properties within nearby locations are compiled. from
the compiled data, adjustments are made by the valuers between the subject property and those similar properties.
the adjustments made are in relation to location, size and shape of the lot, physical features, legal and legislative constraints,
building design and condition, time element, planning provision, improvements and renovation works made, if any, surrounding
developments, facilities and amenities available and other factors that may affect the value of the subject property. these
adjustments are therefore subject to uncertainties such as property market outlook, potential increases in rental rates and
general economic conditions.
in the cost method approach, the indication of values consists of the sum of the present worth of the improvement value.

for the valuation of the improvements, the valuers have considered the following:
(i) cost of replacement of the building in accordance with current trend of market prices for materials, labour, contractor’s
overhead, profit and fees;
(ii) accrued depreciation as evidenced by the observed condition and present and prospective serviceability in comparison
with new units of like kind; and
(iii) extent, character and utility of the property.
the investment method is the capitalisation of net rent from a property. net rent is the residue of gross annual rent less annual
expenses (outgoings) required to sustain the rent with allowance for void and management fees.
the external valuers have considered the results of all these three methods in their valuation and applied professional judgement
in the selection of the fair value of these investment properties.
during the year, the external valuers performed an update of the market values of these investment properties in arriving at the
fair value, after considering the properties’ existing condition. in the previous financial year, the external valuers have considered
the results of all these three methods in their valuation and applied professional judgement in the selection of the fair value of
these investment properties.