BIMB Integrated Annual Report 2019

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 unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement Comparison method: The valuation method consider the sales and listing of comparable properties recorded in the area and adjustments are made between the subject properties and those similar properties. The adjustments are made in relation to location and accessibility, size and shape of the lot, physical features, legal and legislation constraints, building design and condition, supply and demand, building code and public restriction. Adjustment rate based on the comparable sales in the past that was analysed by the National Property Information Centre (NAPIC) under Valuation and Property Services Department, Ministry of Finance Malaysia. The estimated fair value would increase/(decrease) if: – the rate were higher or lower – the historical sales transaction were higher or lower 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. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 232 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance