Question $3(30$ marks$)$

HTM Limited $($HTM$)$ is a company that sells building supplies to both large construction businesses and people doing home improvement projects. They sell their products from warehouses where the goods are displayed on racks with aisles in between. HTM recently bought a competitor, HP Limited $($HP$),$ which also uses warehouses to sell hardware products. However, HP$\text{'}$s warehouses have narrower aisles, so they had to modify their trolleys to fit these smaller spaces.

When measuring the fair value of the trolleys used in HP$\text{'}$s warehouses, it was found that the best use of the trolleys is together with other assets. The trolleys alone do not generate independent cash inflows. Instead, the income comes from the warehouses as a whole, which are seen as a cash$-$generating unit.

Required:

Based on HKFRS $13$ "Fair Value Measurement",

a Discuss the available valuation technique$($s$)$ to measure the fair value of the trolleys used in HP$\text{'}$s warehouses, and explain which available valuation technique$($s$)$ are appropriate and which are inappropriate.

$(6$ marks$)$

b For each appropriate valuation technique$($s$),$ discuss the level of inputs to use to determine the fair value of the trolleys used, and discuss factors to be considered in choosing between the appropriate valuation techniques.

$(24$ marks$)$