Home' Japara Healthcare Annual Report : Japara Healthcare Annual Report 2016 Contents Note
Balance at beginning of year
Additions resulting from capitalised expenditure
Additions through business combinations
Fair value adjustments
Balance at end of year
Use of estimates and judgements
Investment property: Measurement of fair values
The fair value of investment property of $31,669,000 (2015: $31,549,000) has been categorised as Level 3 based on the inputs to the valuation
technique used (see Note A4).
Due to the frequency of residents entering and departing from a unit, the fair value of each unit within a retirement village under a loan licence
agreement is based upon the most recent loan received for a similar unit.
E. Capital structure and financing
E1. Capital management
The Group’s principal sources of funds are cash flows from operations and RADs. The Group may finance its ongoing operations with
operating cash flows or bank borrowings or a combination.
Over time, the Group may seek debt funding from a range of sources to diversify its funding base to reduce reliance on the bank finance
market and to manage its exposure to interest rate risk on long-term borrowings. Quantitative and qualitative disclosures about market risk
sensitive instruments are included in Note E3.
The Group’s working capital requirements are generally consistent throughout the course of the year and there are no significant variations.
The Group maintains a disciplined approach to capital expenditure, with all key capital projects subject to strict approval protocols. Capital
expenditure comprises expenditure on asset enhancement and replacement programs and general maintenance projects (maintenance
expenditure funded from operational cash flows) as well as growth capital expenditure comprising brownfields and greenfields development
projects and acquisition of aged care facilities (funded via equity, borrowings, RAD inflows, operating cash flows or any combination of these,
The Group may borrow money from time to time in order to finance activities.
E2. Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument.
For financial assets, this is equivalent to the date that the Group commits itself to either purchase or sell the asset (e.g. trade date accounting
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through
profit or loss’, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured either at fair value, amortised cost using the effective interest rate method or at cost.
Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties. Where
available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal
repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and
the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that
exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through
the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of
the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with
a consequential recognition of an income or expense item in the Statement of Profit or Loss and Other Comprehensive Income.
52 Japara Healthcare Annual Report 2016
53 Japara Healthcare Annual Report 2016
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