Financial instruments
For the year ended 31 May
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Contingent considerations, included in trade and other payables, are level 3 financial liabilities.
Changes in level 3 instruments are as follows:
| 2017 Reviewed R'000 |
2016 Audited R'000 |
||||
|---|---|---|---|---|---|
| Contingent consideration | |||||
| Opening balance | 83 563 | 123 902 | |||
| Acquisition of Reware Proprietary Limited | 1 150 | – | |||
| Acquisition of Utilities World Proprietary Limited | 4 516 | – | |||
| Settlements | (50 666) | (1 931) | |||
| Gains and losses recognised in profit or loss | (5 589) | (38 408) | |||
| Closing balance | 32 974 | 83 563 | |||
| Total gains or losses for the year included in profit or loss for liabilities held at the end of the reporting period, under: | |||||
| Other income | (10 210) | (48 120) | |||
| Finance costs | 4 621 | 9 712 | |||
| Unrealised gains or losses recognised in profit or loss for liabilities held at the end of the reporting period | 5 304 | 9 127 |
The fair value of the contingent consideration is estimated by applying the income approach. The fair value is based on the discount rates applicable to the Group and management’s probability assumptions on certain warranties being achieved. There have been changes in management’s probability assumptions in respect of certain of the companies. The resulting changes in the fair values are accounted for in other income in the statement of comprehensive income. The discount rate has been increased in line with the increase in the prime lending rate. The resulting changes in the fair values are accounted for in finance costs in the statement of comprehensive income.
The investment in Oxigen Services India, Oxigen Online and 2DFine Mauritius are viewed as venture capital investments and accounted for at fair value, and are level 3 instruments. Refer to “Investment and loans to venture capital associates and joint venture”.
The Group has not disclosed the fair values of all financial instruments measured at amortised cost, as their carrying amounts closely approximate their fair values.