Financial instruments measured in the statement of financial position at fair value require disclosure.  Financial instruments of the Group carried at fair value are disclosed below.

 

Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

 

  • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
  • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
  • Level 3 inputs are unobservable inputs for the asset or liability.

 

 

Reviewed 30 June 2016

Financial instrument carried at fair value

Carrying value – Designated at fair value

R’000

Fair value – Level 3

R’000

Other financial assets

 

  Unaudited 30 June 2015
Financial instrument carried at fair value

Carrying value – Designated at fair value

R’000

Fair value – Level 3

R’000

Other financial assets 8 981 8 981

 

  Audited 31 December 2015
Financial instrument carried at fair value

Carrying value – Designated at fair value

R’000

Fair value – Level 3

R’000

Other financial assets 8 874 8 874

 

Financial instrument carried at fair value

Reviewed

30 June 2016

Unaudited

30 June 2015

Audited

31 December 2015

Fair value gains recognised in profit and loss 5 639

 

 

Financial instrument carried at fair value Reviewed

30 June 2016

Unaudited 30 June 2015 

Audited 31 December 2015

Opening balance at the start of the period 8 874 3 241 3 241
Purchases & revaluations 126 5 854 5 854
Transfer of realised gains recognised in profit and loss (114) (221)
Disposal of financial instrument (9 000)
Balance at the end of the period 8 981 8 874

 

 

 

Measurements of fair value – valuation techniques and significant unobservable inputs

 

The following table reflects the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used:

 

Type Valuation technique Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement
Acquired debt The fair value of acquired debt is determined by applying the discounted cash flow valuation technique, which incorporates the determination of discount rate containing an appropriate risk premium.

 

 

 

 

 

 

 

 

– The expected future cash flows are determined with reference to the current collection performance of the book, benchmark information available within the debt collection industry as well as expected recovery rates determined by the collection service provider. The expected recovery rates are measured against the collection service provider’s model that takes key considerations into account like the quality of the contact  details of the individual debtors contained in the book, the age of the debt  and the quality of the original loan The estimated fair value would increase/(decrease) if:
– the forecast collections were higher/(lower); or
– the risk adjusted discount rate waslower/ (higher). 

 

– A risk adjusted discount rate of 16.5% was applied.

 

 

Financial instruments

The carrying amount of all significant financial instruments approximates the fair value.

 

FINANCIAL RISK MANAGEMENT

The Group’s financial risk management objectives and policies are consistent with those disclosed in the consolidated annual financial statements as at and for the year ended 31 December 2015.