Fair value disclosures

The below illustrative disclosures are limited to financial assets and liabilities measured in accordance with IFRS 9. In many cases, insurers may have other balances that require fair value measurement disclosures in accordance with IFRS 13.

Fair value hierarchy

IFRS Link

Explanation

IFRS 13 73

The insurer categorises a financial asset or a financial liability measured at fair value at the same level of fair value hierarchy as the lowest-level input that is significant to the entire measurement.

The insurer ranks fair value measurements based on the type of inputs, as follows:

IFRS 13 76,

IFRS 13 91(a)

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded equities, bonds and derivatives) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the insurer is the current bid price. These instruments are included in Level 1.

IFRS 13 81

IFRS 13 91(a)

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-specific estimates.

If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

IFRS 13 86

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The insurer has no Level 3 investments during the two reporting periods presented.

IFRS 13 93(c)

There were no transfers between Levels 1 and 2 for recurring fair value measurements during both years.

IFRS 13 95

The insurer’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Valuation techniques used to determine fair values

IFRS Link

Explanation

IFRS 13 91(a)

IFRS 13 93(d)

Specific valuation techniques used to value financial instruments include:

  • the use of quoted market prices or dealer quotes for similar instruments;
  • the fair value of interest rate swaps calculated as the present value of the estimated future cash flows based on observable yield curves;
  • the fair value of forward foreign exchange contracts determined using forward exchange rates at the balance sheet date; and
  • the fair value of the remaining financial instruments determined using discounted cash flow analysis.

IFRS 13 93(b)

All of the resulting fair value estimates are included in Level 2.

IFRS 13 91-92

Food for thought

The presented disclosures on fair value measurement are kept concise. The objective of IFRS 13 is to disclose information that helps users of financial statements assess both of the following:

  1. for assets and liabilities that are measured at fair value on a recurring or non-recurring basis on the balance sheet after initial recognition, the valuation techniques and inputs used to develop those measurements; and
  2. for recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or OCI for the period.

In order to meet these objectives, an entity shall consider all of the following:

  1. the level of detail necessary to satisfy the disclosure requirements;
  2. how much emphasis to place on each of the various requirements;
  3. how much aggregation or disaggregation to undertake; and
  4. whether users of financial statements need additional information to evaluate the quantitative information disclosed.

Table of financial instruments at fair value

This note sets out the split of financial instruments by fair value hierarchy level [IFRS 7 6, IFRS 7 25-26, IFRS 13 93 (b) and IFRS 13 94]:

The entity has no Level 3 financial instruments at fair value.

Classification of investment contract liabilities

The Group issues investment contracts without DPF that are designated at FVTPL. For the purpose of the Illustration, it is assumed that these investment contracts are not quoted in an active market and do not have readily available published prices and that their fair values are determined using valuation techniques. It is assumed that all significant inputs used in the valuation are observable and these investment contract liabilities are classified in Level 2. Other classifications are possible depending on the nature of investment products and valuation methods and inputs involved.

Financial instruments not measured at fair value

IFRS Link

Explanation

IFRS 7 29 (a)

The carrying amounts of cash and cash equivalents, floating rate subordinated debt, other financial assets and other financial liabilities approximate their fair value.

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