Annual Report 2012 - Bank Sarasin

7.2 Financial Instruments
Fair value of financial instruments
The following table shows the fair value of financial instruments based on the valuation methods and assumptions described below. Fair value is the amount for which assets could be
exchanged or liabilities honoured between knowledgeable, unconnected third parties wishing to conclude a contract. The Sarasin Group uses the market price whenever an active market
(e.g. a recognised stock exchange) exists because it is the best indicator of the fair value of financial instruments.
CHF 000 31.12.2012 Variance 31.12.2011
Variance
Carrying value Fair value Carrying value Fair value
Assets
Cash and cash equivalents 1,983,531 1,983,531 0 192,827 192,827 0
Money market papers 680,518 680,518 0 537,058 537,058 0
Due from banks 2,603,035 2,607,169 4,134 2,571,929 2,574,531 2,602
Due from customers 8,817,685 8,894,468 76,783 9,932,036 10,028,668 96,632
Trading portfolio assets 629,896 629,896 0 693,503 693,503 0
Derivative financial instruments 152,056 152,056 0 528,665 528,665 0
Financial investments designated at fair value 354,684 354,684 0 565,813 565,813 0
Financial investments available for sale 2,134,284 2,134,284 0 2,043,866 2,043,866 0
Subtotal 17,355,689 17,436,606 80,917 17,065,697 17,164,931 99,234
Liabilities
Due to banks 1,324,001 1,328,563 -4,562 1,641,007 1,647,662 -6,655
Due to customers 13,128,027 13,128,660 -633 12,618,787 12,620,451 -1,664
Trading portfolio liabilities 80,292 80,292 0 37,603 37,603 0
Derivative financial instruments 145,028 145,028 0 444,753 444,753 0
Financial liabilities designated at fair value 1,039,524 1,039,524 0 829,395 829,395 0
Debt issued 444,235 457,301 -13,066 383,927 388,127 -4,200
Subtotal 16,161,107 16,179,368 -18,261 15,955,472 15,967,991 -12,519
Total variance 62,656 86,715
The following valuation methods are used to determine the fair value of on-balance sheet financial instruments:
Short-term financial instruments
Financial instruments with a maturity or refinancing profile of one year or less are generally classified as short term. They may fall into any of the following balance sheet categories:
“cash and other liquid assets”, “money market investments”, “money market liabilities” and, depending on the maturity, “due from banks”, “due from customers”, “due to banks” and “due to customers”.
In the case of short-term financial instruments that do not have a published market value on a recognised stock exchange or a representative market (hereinafter market value), the carrying value essentially
corresponds to the fair value.
Long-term financial instruments
These instruments, which may fall into the categories of claims on and liabilities to banks and customers, medium-term notes or loans, have a maturity or a refinancing profile of over one year.
If the interest rate or the flow of payments is not determined in advance, we use replicating portfolios. Fair value is based on market rates if a liquid market exists. Otherwise it is
determined by the cash value method.
Trading portfolios, financial investments
For the majority of financial instruments held in trading portfolios and among financial investments, fair value corresponds to market value. The fair value of instruments with no market value
is determined by means of recognised valuation methods.
Derivative financial instruments
Fair value corresponds to market value for most positive and negative replacement values (Note 2.19). The fair value of derivative instruments with no market value is determined by means
of recognised models, which take account of relevant parameters such as the contract specifications, the market price of the underlying security, the yield curve and volatility.
Sensitivity of fair value compared with the use of alternative realistic valuation assumptions
For a small number of financial instruments stated at fair value in the balance sheet, our valuation is derived from valuation models and not from actual market prices or other market observations.
Such valuation models are continuously monitored before their introduction and during the period of their application. The adoption of less favourable assumptions would not significantly
affect the fair value of the financial instruments used.
Bank Sarasin & Co. Ltd, Annual Report 2012 | 90