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Notes to the Financial Statements (cont’d)
For the financial year ended 31 December 2011
39. Fair values of financial instruments (cont’d)
(a) Fair value of financial instruments that are carried at fair value (cont’d)
Fair value hierarchy
The Group classified 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 (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 (i.e., as prices) or indirectly (i.e., derived from prices), and
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
There has been no transfer between Level 1 and Level 2 during the financial years ended 2011 and 2010.
Determination of fair vale
Quoted equity instruments: Fair value is determined directly by reference to their published market bid price at the
reporting date.
Unquoted equity instruments: These investments are valued using valuation models which use both observable and nonobservable
data. The non-observable inputs to the models include assumptions regarding the future financial performance
of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which
the investee operates.
Derivatives: Foreign currency forward currency contracts and interest rate swap contracts are valued using a valuation
technique with market observable inputs. These contracts are valued by financial institutions.
Movements in Level 3 financial instruments measured at fair value
The following table presents the reconciliation for all financial instruments measured at fair value based on significant
unobservable inputs (Level 3).
Assets measured at fair value based on Level 3
Group
Available-for-sale
financial asset
Equity instrument
(unquoted)
RM’000
At 1 January 2010 –
Addition 34,320
At 31 December 2010 34,320
Impairment loss recognised in profit or loss under Exceptional loss (Note 11) (16,602)
At 31 December 2011 17,718
There has been no transfer from Level 1 and Level 2 to Level 3 during the financial year ended 2011.
MALAYSIA SMELTING CORPORATION (43072-A) • ANNUAL REPORT 2011 163