Annual report 2009 - Dexia.com

Notes to the consolidated fi nancial statementsExcept for liabilities “held for trading” and “designated at fair value”, the own credit spread on liabilities has been consideredas unchanged in the determination of the fair value.The line “Fair value revaluation of portfolio hedge” corresponds to the remeasurement of the interest-rate risk on liabilitiescovered by portfolio hedges. These liabilities are included in the lines “Due to banks”, “Customer borrowings and deposits”and “Debt securities”.B. ANALYSIS OF FAIR VALUE OF FINANCIAL INSTRUMENTSB.1. Assets31/12/08 31/12/09Level 1 (1) Level 2 (2) Level 3 (3) Total Level 1 (1) Level 2 (2) Level 3 (3) TotalFinancial assets held fortrading 6,692 2,409 1,735 10,836 1,432 1,607 3,323 6,362Financial assets designatedat fair value 4,803 380 25 5,208 3,308 197 210 3,715Financial assets availablefor sale 39,097 64,301 19,664 123,062 32,946 18,796 51,943 103,685Derivatives 335 54,383 495 55,213 25 37,464 3,239 40,728TOTAL 50,927 121,473 21,919 194,319 37,711 58,064 58,715 154,490(1) Fair value based on market prices quoted in active market.(2) Fair value based on observable market data.(3) Fair value based on pricing models for which some key market data are unobservable.B.2. Liabilities31/12/08 31/12/09Level 1 (1) Level 2 (2) Level 3 (3) Total Level 1 (1) Level 2 (2) Level 3 (3) TotalFinancial liabilities heldfor trading 271 2 0 273 212 62 1 275Financial liabilitiesdesignated at fair value 3,865 8,667 6,147 18,679 0 15,691 3,379 19,070Derivatives 297 74,464 1,073 75,834 3 54,492 3,869 58,364TOTAL 4,433 83,133 7,220 94,786 215 70,245 7,249 77,709(1) Fair value based on market prices quoted in active market.(2) Fair value based on observable market data.(3) Fair value based on pricing models for which some key market data are unobservable.Dexia restated the disclosure on fair value classificationreported in 2008 for the following reasons:• The IASB published the Amendment to IFRS 7 – ImprovingDisclosure about Financial Instruments – in March 2009 andan Exposure Draft on Fair Value Measurement in May 2009.These texts better defined the classification between levels 1,2 and 3 and clarified that an instrument must be classified inlevel 3 based on “the lowest level input that is significant tothe fair value measurement in its entirety”.• For these financial instruments not quoted on a market,Dexia developed internal models to determine the fair valueincluding the major risk parameters (see sensitivity sectionhereunder). In the past, credit risk has been assessed as themost important unobservable input having an impact, consideredas limited, on the fair value of the financial instrument.This is explained by the fact that Dexia’s counterparties aremainly governments, public authorities and banks. However,considering the new texts published, Dexia put more emphasison liquidity risk, which has a significant impact on the fairvalue due to Dexia’s specific business model, namely longtermfinancing.This restatement of fair value classification has no impact onthe measurement of the financial instruments but is only adisclosure issue.Management reportConsolidatedfinancial statementsAnnual financial statementsAdditional informationAnnual report 2009 Dexia 187