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TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD
Notes to Financial Statements, continued Year ended March 31, 2013
4. Determination of fair values
A number of NIB’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes, as described below. Where applicable, further information about the assumptions made in determining fair value has been disclosed in the notes specific to that asset or liability.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Where an active market exists market price is used as the best evidence of the fair value of a financial instrument. Where no market price is available, the fair values presented have been estimated using present value or other estimation and valuation techniques based on market conditions existing at the reporting date. The values derived from applying these techniques are significantly affected by the underlying assumptions used concerning both the amounts and timing of future cash flows and the discount rates.
The following methods and assumptions have been used:
 The fair value of liquid assets and other assets maturing within one year is assumed to approximate their carrying amount. This assumption is applied to liquid assets and the short-term elements of all other financial assets and financial liabilities; and
 The fair value of variable-rate financial instruments is assumed to approximate their carrying amounts.
(a) Investment property
An external, independent, valuation company, with recognised and relevant professional qualifications and recent experience in the location and category of property being valued, valued NIB’s investment property. The fair values were based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. In the absence of current prices in an active market, the valuations were prepared by considering the following:
 Taking the aggregate of estimated cash flows expected to be received from renting out the property, an approach which is also known as an income capitalisation approach. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation. Valuations reflect, where appropriate, the nature of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between NIB and the lessee, and the remaining economic life of the applicable property.
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