THE WAIKATO COMMUNITY TRUST INCORPORATED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2014

The fair value of investments in private equity is determined internally by the fund manager and general partner, in accordance with NZ GAAP, and using valuation techniques including the discounted cash flow method and earnings multiples. The valuation relies on financial data of investee companies and estimates by management.

The fair value of the investment in global credit is based on the net asset value adjusted for transaction costs. Listed securities are valued using the last available market close price on the relevant exchange and other assets are valued at their recoverable amount. Valuations of recoverable amounts include assumptions made by the valuer. Liabilities are valued at cost.

The fair value of unlisted property is based on external independent market valuation for investment properties. This valuation is dependent on management estimates of capitalisation and discount rates, inflows from rental income and maintenance requirements. Independent external valuations of projects under construction or refurbishment are also undertaken.

3.9.3 Derivative Financial Instruments at Fair Value Through Profit or Loss

The Trust classifies forward foreign exchange contracts used to reduce exposure to fluctuations in foreign currency denominated assets as derivative financial instruments. As these are not traded in an active market, but the valuation technique is based on observable market data, the instruments are included in Level 2 of the fair value hierarchy within NZ IFRS 7 Financial Instruments: Disclosures.

The fair value of forward foreign exchange contracts is determined by the mark to market value at each balance sheet date.

3.9.4 Available for Sale Financial Assets

The fair value of TKPLP is determined using an appropriate valuation technique. As the valuation is not based on observable market data, the Trust classifies TKPLP as Level 3 within the fair value hierarchy of NZ IFRS 7 Financial Instruments: Disclosures.

3.10 Property, Plant and Equipment

Land is valued at cost. Buildings, office equipment, art and artefacts, and motor vehicles are stated at cost less accumulated depreciation and any impairment losses.

Rental property, leased under an operating lease, is included in property, plant and equipment in accordance with NZ IFRS as the rental property is held to provide a social service rather than for rental income or capital appreciation or both.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Trust and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

The carrying amounts of Property, Plant and Equipment are reviewed at each balance date to determine whether there is any indication of impairment. An impairment loss is recognised whenever an asset carrying amount exceeds its estimated recoverable amount. Impairment losses directly reduce the carrying amount of assets and are recognised in the Statement of Comprehensive Income. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within the Statement of Comprehensive Income.