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Annual Report & Accounts 2016 - Notes
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102 Financial statements continued GVC Holdings PLC Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the year ended 31 December 2016 25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED 25.6 Fair values The carrying amounts of the financial assets and liabilities, including deferred consideration in the Statement of Financial Position at 31 December 2016 and 2015 for the Group and Company are a reasonable approximation of their fair values. Financial assets and financial liabilities measured at fair value in the Statement of Financial Position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly • Level 3: unobservable inputs for the asset or liability. The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 31 December 2016 and 31 December 2015: AT 31 DECEMBER 2016 Level 1 €m Level 2 €m Level 3 €m Total €m FINANCIAL ASSETS Available for sale financial assets - 2.2 0.4 2.6 Deferred consideration - - 1.8 1.8 Contingent consideration - 0.6 4.0 4.6 Derivative financial assets - - 26.2 26.2 - 2.8 32.4 35.2 FINANCIAL LIABILITIES Contingent consideration - - (4.4) (4.4) - - (4.4) (4.4) AT 31 DECEMBER 2015 Level 1 €m Level 2 €m Level 3 €m Total €m FINANCIAL ASSETS Available for sale financial assets - - 2.6 2.6 Derivative financial assets - - 3.8 3.8 - - 6.4 6.4 FINANCIAL LIABILITIES Derivative financial liabilities - (9.9) (0.7) (10.6) - (9.9) (0.7) (10.6) There were no transfers between levels in 2016 or 2015. Measure of fair value of financial instruments: The Group's finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The valuation techniques for the derivative financial assets and liabilities are described in further detail in note 12 above. The valuation technique for the available for sale asset and the contingent and deferred consideration assets and liabilities were discounted cashflow forecasts using the weighted average cost of capital and expected cashflows.