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notes to the financial statements (cont’d)
for the financial year ended 30 June 2014
ANNUAL REPORT 2014
117
34. Fair value of financial instruments (CONT’D)
(b) Determination of fair value (cont’d)
(iv) Loans and borrowings
The carrying values of bank borrowings and term loans approximate their fair values as they bear interest
rates which approximate the current incremental borrowing rates for similar types of lending and borrowing
arrangements.
(v) Derivatives
The fair values of cross currency swaps and forward currency contract are the amounts that would be
payable or receivable on termination of the outstanding position arising and are determined by reference
to the difference between the contracted rate and forward exchange rates at the reporting date for
contracts with similar maturity profiles.
(vi) Financial guarantees
Fair value is determined based on the probability weighted discounted cash flow method. The probability
has been estimated and assigned for the following key assumptions:
-
The likelihood of the guaranteed party defaulting within the guaranteed period;
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The exposure on the portion that is not expected to be recovered due to the guaranteed party’s
default;
-
The estimated loss exposure if the party guaranteed were to default.
35. Fair value of measurement
Fair value hierarchy
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements. The fair value hierarchy has the following levels:
Level 1
-
Quoted prices in active markets for identical assets or liabilities;
Level 2
-
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly; and
Level 3
-
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).