AVBOB Financial Statements 2018

105 AVBOB MUTUAL ASSURANCE SOCIETY AND ITS SUBSIDIARIES NOTES TO THE SUMMARISED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (continued) 9. PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTY AND INTANGIBLE ASSETS (continued) SOCIETY GROUP 2018 2017 2018 2017 R 000 R 000 R 000 R 000 10. INVESTMENTS IN SUBSIDIARIES Unlisted Shares at cost 35 658 35 658 - - Fair value adjustment 237 342 199 942 - - Directors' valuation (Non-current asset) 273 000 235 600 - - Directors' valuation of subsidiaries AVBOB Funeral Service Limited 144 000 126 200 - - AVBOB Industries Limited 95 000 74 000 - - AVBOB Namibia Holdings (Proprietary) Limited and subsidiaries 34 000 35 400 - - 273 000 235 600 - - Investment property for the Society's and Group's use was formally valued by the directors at 30 June 2018 based on market values, using external valuations on six high value properties. The carrying values of the properties were adjusted to the revalued amounts and the fair value adjustment was charged to investment income. The market value is reviewed and adjusted annually by the directors. The recoverable amount of a subsidiary is determined based on an income approach calculation. These calculations use cash flow projections based on approved financial budgets covering a five-year period. Cash flows beyond the five- year period are extrapolated using the estimated growth rates. All the Society's investment properties are owner occupied within the Group. No investment property is pledged as security. The fair value measurement is classified as Level 3. The fair values of investments in subsidiaries are based on the weighted average cost of capital (WACC) of each subsidiary, which is calculated based on a gross risk-free interest rate, an assumed equity risk premium, a market assessed risk factor (beta), and an allowance for subordinated debt on a market value basis. The market assessed risk factor (beta) captures the market’s view of the effect of all types of risk on the subsidiaries' operations, including operational and other non-economic risk. 105