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18. |
INVESTMENT PROPERTIES |
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December 31 |
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2016 |
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2017 |
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NT$ |
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NT$ |
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(In Millions) |
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Carrying amount |
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Investment properties |
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$ |
8,115 |
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$ |
8,048 |
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Investment Properties |
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NT$ |
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(In Millions) |
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Cost |
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Balance on January 1, 2015 |
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$ |
8,883 |
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Disposal |
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— |
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Reclassification |
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175 |
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Balance on December 31, 2015 |
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$ |
9,058 |
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Accumulated depreciation and impairment |
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Balance on January 1, 2015 |
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$ |
(1,262 |
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Depreciation expense |
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(18 |
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Disposal |
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— |
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Reclassification |
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(18 |
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Reversal of impairment loss |
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142 |
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Balance on December 31, 2015 |
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$ |
(1,156 |
) |
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Cost |
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Balance on January 1, 2016 |
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$ |
9,058 |
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Additions |
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— |
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Reclassification |
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137 |
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Balance on December 31, 2016 |
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$ |
9,195 |
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Accumulated depreciation and impairment |
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Balance on January 1, 2016 |
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$ |
(1,156 |
) |
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Depreciation expense |
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(19 |
) |
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Reclassification |
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(53 |
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Reversal of impairment loss |
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148 |
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Balance on December 31, 2016 |
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$ |
(1,080 |
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Cost |
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Balance on January 1, 2017 |
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$ |
9,195 |
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Reclassification |
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(60 |
) |
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Balance on December 31, 2017 |
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$ |
9,135 |
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Accumulated depreciation and impairment |
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Balance on January 1, 2017 |
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$ |
(1,080 |
) |
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Depreciation expense |
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(21 |
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Reclassification |
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3 |
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Reversal of impairment loss |
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11 |
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Balance on December 31, 2017 |
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$ |
(1,087 |
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Depreciation expense is computed using the straight-line method over the following estimated service lives:
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Land improvements |
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8-30 years |
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Buildings |
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Main buildings |
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35-60 years |
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Other building facilities |
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4-10 years |
After the evaluation of land and buildings, the Company concluded the recoverable amount which represented the fair value less costs to sell of some land and buildings was higher than the carrying amount in 2015, 2016 and 2017. Therefore, the Company recognized reversals of impairment loss of $142 million, $148 million and $11 million for the years ended December 31, 2015, 2016 and 2017, respectively, and the amounts were recognized only to the extent of impairment losses that had been recognized in prior years. The reversal of impairment loss was included in other income and expenses in the statements of comprehensive income.
The fair values of the Company’s investment properties as of December 31, 2016 and 2017 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:
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December 31 |
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2016 |
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2017 |
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NT$ |
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NT$ |
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(In Millions) |
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Fair value |
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$ |
17,778 |
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$ |
17,728 |
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Overall capital interest rate |
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1.46%-2.20% |
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1.46%-2.20% |
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Profit margin ratio |
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10%-20% |
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12%-20% |
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Discount rate |
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1.04 |
% |
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1.04% |
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Capitalization rate |
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0.43%-1.78% |
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0.47%-1.69% |
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All of the Company’s investment properties are held under freehold interest.