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N
otes To The Consolidated Financial Statements
AL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIES
As At 31 December 2016
ANNUAL REPORT
2016
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below:
The group had based its assumptions and estimation on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future developments however may
change due to market changes or circumstances arising beyond the content of the Group. Such changes are
reflected in the assumptions when they occur.
Estimation of net realisable value for property held for trading
Property held for trading is stated at the lower of cost and net realisable value (NRV). NRV for completed property
held for trading is assessed with reference to market conditions and prices existing at the reporting date and is
determined by the Group in the light of recent market transactions.
NRV in respect of property held for trading under construction is assessed with reference to market prices at the
reporting date for similar completed property, less estimated costs to complete construction and less an estimate of
the time value of money to the date of completion.
Valuation of investment properties
Fair value of investment properties have been assessed by an independent real estate appraiser.Three main methods
were used to determine the fair value of property interests in investment properties; (a) formula based discounted
cash flow analysis (b) Income approach and (c) comparative analysis as follows:
(a) Formula based discounted cash flow, is based on a series of projected free cash flows supported by the terms
of any existing lease and other contracts and discounted at a rate that reflects the risk of the asset.
(b) Income approach, where the property’s value is estimated based on the its income produced, and is computed
by dividing the property’s net operating income by the expected rate of return on the property in the market,
known as ‘Capitalization Rate’.
(c) Comparative analysis is based on the assessment made by an independent real estate appraiser using values
of actual deals transacted recently by other parties for properties in a similar location and condition, and based
on the knowledge and experience of the real estate appraiser.
The significant methods and assumptions used by valuers in estimating fair value of investment properties are stated
in Note 9 and 29.
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