TAN CHONG MOTOR HOLDINGS BERHAD
Annual Report 2014
124
NOTES TO THE FINANCIAL STATEMENTS
33. Financial instruments (continued)
33.8 Fair value information (continued)
Policy on transfer between levels
The fair value of an asset to be transferred between levels is determined as of the date of the event or change in
circumstances that caused the transfer.
Level 1 fair value
Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or
liabilities that the entity can access at the measurement date.
Level 2 fair value
Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for
the financial assets or liabilities, either directly or indirectly.
Derivatives
The fair value of forward exchange contracts is estimated by discounting the difference between the contractual
forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate
(based on government bonds).
Non-derivative financial assets/liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal
and interest cash flows, discounted at the market rate of interest at the end of the reporting period. For finance
lease receivables and hire purchase receivables, the market rate of interest is determined by reference to similar
finance lease and hire purchase agreements.
Transfers between Level 1 and Level 2 fair values
There has been no transfer between Level 1 and 2 fair values during the financial year. (2013: no transfer in either
direction)
Level 3 fair value
Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities.
Fair values of hire purchase receivables, finance lease receivables and forward exchange contracts have been
generally derived using discounted cash flow approach.
Valuation processes applied by the Group for Level 3 fair value
TheGroup has an established control framework in respect to themeasurement of fair values of financial instruments.
This includes a team that has overall responsibility for overseeing all significant fair value measurements, including
Level 3 fair values, and reports directly to the Chief Financial Officer. The team regularly reviews significant
unobservable inputs and valuation adjustments.
