EDC PR 2016 (FS section)

Financial Statement
Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
“Day 1” Differences
Where the transaction price in a non-active market is different from the fair value of other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Company recognizes the difference
between the transaction price and fair value (a “Day 1” difference) in profit or loss unless it
qualifies for recognition as some other type of asset. In cases where use is made of data which is
not observable, the difference between the transaction price and model value is only recognized in
profit or loss when the inputs become observable or when the instrument is derecognized. For
each transaction, the Company determines the appropriate method of recognizing the “Day 1”
difference amount.
Derivative Financial Instruments and Hedge Accounting
The Company uses cross-currency swaps, interest rate swaps and forwards to manage its interest
rate and foreign currency risk exposures in its US dollar-denominated loans. Accrual of interest
on the received and pay legs of the interest rate swaps are recorded as adjustments to the interest
expense on the related foreign currency-denominated loans. Accrual of interest on the pay legs of
the various currency swaps are recognized in the consolidated statements of income as “Interest
expense”.
203