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Notes To The Consolidated Financial Statements
(Expressed in Renminbi)
Annual Report 2011 /
1
43 Financial risk management and fair values
(continued)
(f) Fair value
(continued)
(ii)
Fair values of financial instruments carried at other than fair value
The fair values of cash and cash equivalents, accounts and bills receivable, prepayments and
other current assets, accounts and bills payable and accrued expenses and other payables are
not materially different from their carrying amounts.
The fair values of Group’s unquoted other investments could not be reasonably estimated
without incurring excessive costs, since there are no listed market prices for such interest in
the PRC.
(g) Estimation of fair values
The following summaries the major methods and assumptions used in estimating the fair values of
financial instruments.
(i)
Other investments
The fair value of other investments traded in active markets is based on quoted market prices
at the balance sheet date. The quoted market price used for financial assets held by the Group is
the current bid price.
(ii)
Interest-bearing borrowings
The fair values of the Group’s interest-bearing borrowings are estimated to approximate to their
carrying amount based on short-term maturity.
(iii) Share appreciation rights
The fair value of share appreciation rights is measured using the Black-Scholes formula.
Measurement inputs include stock price on measurement date, exercise price of the
investment, expected volatility, weight average expected life of the instruments, expected
dividends and risk-free interest rate. Service and non-market performance conditions attached
to the transactions are not taken into account in determine the fair value.
44 Significant accounting estimates and judgements
In determining the carrying amounts of certain assets and liabilities, the Group makes assumptions of the
effects of uncertain future events on those assets and liabilities at the balance sheet date. These estimates
involve assumptions about such items as risk adjustment to cash flows or discount rates used, future
changes in salaries and future changes in prices affecting other costs. The Group’s estimates and assumptions
are based on historical experience and expectations of future events and are reviewed periodically. In addition
to assumptions and estimations of future events, judgements are also made during the process of applying
the Group’s accounting policies. In addition to those disclosed in note 21, other significant accounting estimates
and judgements were summarised as follows:
(a) Construction contracts
As explained in notes 2(n) and 2(w)(i) revenue and profit recognition on an uncompleted project is
dependent on estimating the total outcome of the construction contract, as well as the work done to
date. Based on the Group’s recent experience and the nature of the construction activity undertaken
by the Group, the Group makes estimates of the point at which it considers the work is sufficiently
advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this
point is reached the amounts due from customers for contract work as disclosed in note 30 will not
include profit which the Group may eventually realise from the work done to date. In addition, actual
outcomes in terms of total cost or revenue may be higher or lower than that estimated at the balance
sheet date, which would affect the revenue and profit recognised in future years as an adjustment to
the amounts recorded to date.