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(i) Fair value hierarchy and accounting classification (continued)
Level 1:
The fair value of instruments traded in active markets (such as publicly traded derivatives,
and trading and available-for-sale securities) is based on quoted market prices at the end of the
reporting period. These instruments are included in level 1.
Level 2:
The fair value of instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which 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.
Level 3:
If one or more of the significant inputs is not based on observable market data,
the instrument is included in level 3.
Disclosed fair values
The carrying amounts of trade receivables and payables, bonds, banking facilities, cash and
short term deposits equates approximately to their fair values due to their nature and are carried
at amortised cost.
All investments in shares are held at cost.
There were no transfers between levels 1, 2 and 3 for recurring fair value measurements during the
current or the previous financial year. The Group’s policy is to recognise transfers into and transfers
out of fair value hierarchy levels as at the end of the reporting period.
(ii) Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include:
•
•
The fair value of interest rate swaps is calculated as the present value of the estimated future
cash flows based on observable yield curves. The present values and discounted rates used
were adjusted for counterparty and own credit risk and are not considered a significant input.
•
•
The fair value of forward foreign exchange contracts is determined using forward exchange rates
at the balance sheet date.
•
•
The fair value of infrastructure assets is determined using risk adjusted discounted cash flow
projections based on reasonable estimates of future cash flows.
NOTE 12 (CONTINUED)
FINANCIAL RISK MANAGEMENT
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