3.5 Parameters and assumptions applied in measuring non-quoted financial assets

In accordance with the internal rules on the valuation of equity investments relating to certain non-tradable assets, their fair value is established by arriving at a valuation (i.e. by making an appraisal) in compliance with IAS 39. The methods used include: the discounted cash flow method, the listed comparable companies method and the asset valuation method. The choice of method depends on the nature of the business of the company under appraisal. In order to obtain an impartial opinion, most of the value appraisals of other non-tradable assets have been provided by outsourced assessors.

Value appraisals of other non-tradable assets are based on the assumptions the assessor makes on the basis of public information and, where possible, on an interview with the management of the company under appraisal. The applied estimates and assumptions involve certain risks as to their future realisation. With the aim of reducing this risk, the assumptions and estimates applied are verified by different methods (by comparing assumptions and estimates against the industry average, individual traded companies, etc.). Moreover, a sensitivity analysis of the following value drivers is applied in order to estimate the value range of the company: the discount rate, net sales income, the EBITDA margin, and cash flow growth over a forecast period.

Sensitivity analyses for more detailed forecast periods (most commonly 5 to 10 year periods are taken into account) involve the following ranges for the above mentioned categories: income growth (2.5–5.5%), the EBITDA margin (3.0–8.2%), the discount rate (10.3–14.5%) and cash flow growth over a forecast period of (2.0–4.5%). The value, i.e. the range, of any of the given categories, depends on the character of the business and/or the risks associated with the analysed company and/or industry in which it operates.

Depending on the chosen assumptions, the process of value appraisal can result in differently appraised value ranges. A value within the calculated appraised value range is selected as the best assessment of an asset's fair value. In some cases, the appraised value range is rather wide. Due to the above mentioned uncertainty inherent to the process of appraising the value of non-tradable assets, which results in a relatively wide appraised value range, the Group aims to apply a consistent and prudent approach to best assessing an asset's fair value and thus minimising any subjective elements in this process.


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