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Atul Ltd | Annual Report 2016-17
Note 27.7 Fair value measurements
(continued)
Level 1:
Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity
instruments and mutual fund units that have a quoted price. The fair value of all equity instruments which are traded on
the Stock Exchanges is valued using the closing price as at the reporting period. The mutual fund units are valued using
the closing net assets value.
Level 2:
The fair value of financial 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. Financial assets valued using Level 3 valuation techniques comprise of unquoted Preference shares in subsidiary
company with a fair value amount of
`
2.40 cr as on April 01, 2015. These Preference shares have been redeemed in the
financial year ended March 31, 2016. These investments are collectively not material and hence disclosures regarding
significant unobservable inputs used in Level 3 fair values have not been made.
b) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
i)
the use of quoted market prices or dealer quotes for similar instruments
ii) the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves
iii) the fair value of forward foreign exchange contracts are determined using forward exchange rates at the Balance
Sheet date
iv) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model
v) the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 1 and 2.
c) Valuation processes
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities
required for financial reporting purposes, including level 3 fair values.
d) Fair value of financial assets and liabilities measured at amortised cost
(
`
cr)
Particulars
As at
March 31, 2017
As at
March 31, 2016
As at
April 01, 2015
Carrying
amount
Fair value Carrying
amount
Fair value Carrying
amount
Fair value
Financial assets
Investments:
Preference shares
7.10
7.04
6.43
7.37
5.81
6.54
Government securities
0.01
0.01
0.01
0.01
0.01
0.01
Loans for utilities and premises
12.19
13.78
13.67
12.93
12.18
15.24
Security deposits
3.27
3.27
3.46
3.46
3.59
3.59
Finance lease receivable
1.38
1.38
1.29
1.29
1.42
1.42
Total financial assets
23.95
25.48
24.86
25.06
23.01
26.80
Financial Liabilities
Borrowings
155.23
154.80
301.67
300.05
278.66
275.14
Security deposits
19.30
19.30
18.51
18.51
14.93
14.93
Total financial liabilities
174.53
174.10
320.18
318.56
293.59
290.07
Notes
to the Financial Statements