172
AirAsia X Berhad • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2014
29 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED)
(e)
Fair value measurement (continued)
The following table presents the Group and Company’s assets and liabilities that are measured at fair value.
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
Group and Company
31 December 2014
Liabilities
Financial liabilities at fair value through profit or loss
- Trading derivatives
-
102,993
-
102,993
-
102,993
-
102,993
31 December 2013
Assets
Financial assets at fair value through profit or loss
- Trading derivatives
-
5,541
-
5,541
Derivatives used for hedging
-
60,388
-
60,388
-
65,929
-
65,929
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical
assets or liabilities in active markets where the quoted prices is readily available, and the price represents actual and regularly occurring market transactions. An active market
is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These would include actively traded listed equities
and actively exchange-traded derivatives.
Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets and liabilities, such instruments are generally classified as
Level 2. In cases where quoted prices are generally not available, the Group then determines fair value based upon valuation techniques that use as inputs, market parameters
including but not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only observable market data and so reliability of the
fair value measurement is high. These would include certain bonds, government bonds, corporate debt securities, repurchase and reverse purchase agreements, loans, credit
derivatives, certain issued notes and the Group’s over the counter (“OTC”) derivatives. The Group’s level 2 hedging derivatives comprise fuel swap contracts. Specific valuation
technique used to value financial instruments includes:
• The fair value of CCIRS contracts is determined using forward interest rates extracted from observable yield curves and forward exchange rates at the balance sheet
date, with the resulting value discounted back to present value;
• The fair value of fuel swap contracts is determined using forward fuel price at the balance sheet date, with the resulting value discounted back to present value.
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs
are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or other analytical techniques.
