In preparing the financial statements, management is required to make estimates and assumptions which affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgement are inherent in the formation of estimates, together with past experience and expectations of future events that are believed to be reasonable under the circumstances. Actual results in the future could differ from such estimates.
Where they consider that fair value can be reliably measured, the Directors must make an estimate of that fair value, applying the overriding concept that fair value is the amount for which an asset can be exchanged between knowledgeable willing parties in an arm's length transaction. Valuation methodologies for these investments will inherently involve a significant degree of management judgement and therefore the valuation of investments may differ materially from the value that would have been used had a ready market existed for the investment and may differ materially from the proceeds receivable upon realisation.
Where they consider that fair value cannot be reliably measured, judgements are required in assessing the recoverable value of the investments for the purpose of impairment assessment. Where indicators of impairment exist, the Company reviews the carrying value of its investments for impairment based on their recoverable value, being the higher of the investments value in use and fair value less costs to sell.
Factors taken into consideration in reaching a conclusion on the recoverable amount of investments include the economic viability and expected future financial performance of the asset.