Financial instruments
Contingent considerations, included in trade and other payables, are level 3 financial liabilities.
Changes in level 3 instruments are as follows:
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| Six months ended 30 November 2016 Unaudited R’000 |
Six months ended 30 November 2015 Unaudited R’000 |
Year ended 31 May 2016 Audited R’000 |
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|---|---|---|---|---|---|---|
| Contingent consideration | ||||||
| Opening balance | 83 563 | 123 902 | 123 902 | |||
| Acquisition of Reware Proprietary Limited | 1 150 | – | – | |||
| Acquisition of Utilities World Proprietary Limited | 4 516 | – | – | |||
| Settlements | (49 109) | (1 631) | (1 931) | |||
| Gains and losses recognised in profit or loss | 2 271 | 3 931 | (38 408) | |||
| Closing balance | 42 391 | 126 202 | 83 563 | |||
| Total gains or losses for the period included in profit or loss for liabilities held at the end of the reporting period, under: | ||||||
| Other income | – | – | (48 120) | |||
| Finance costs | 2 271 | 3 931 | 9 712 | |||
| Change in unrealised gains or losses for the period included in profit or loss for liabilities held at the end of the reporting period | 2 003 | 655 | 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 no changes in management’s probability assumptions. 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 Private Limited, viewed as a venture capital investment and accounted for at fair value, is a level 3 instrument. Refer to “Investments in and loans to associates and joint ventures”.
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.