MISC Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 329 MISC BERHAD ANNUAL REPORT 2018 328 37. FAIR VALUE DISCLOSURES (CONT'D.) Fair value information (cont'd.) Transfers between Level 1 and Level 2 fair values There has been no transfers between Level 1 and Level 2 fair values during the financial year. Level 1 fair value measurements Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical assets that the entity can assess at the measurement date.  Level 2 fair value measurements Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the asset either directly or indirectly. The following are descriptions of the valuation techniques and inputs used in the fair value measurement for assets and liabilities that are categorised within Level 2 of the fair value hierarchy: Derivatives Interest rate swap contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves. Non-derivative financial liabilities The fair value of the fixed rate loan and borrowings which is determined for disclosure purposes is calculated by discounting expected future cash flows at the market rate of interest at the end of the reporting period. Level 3 fair value measurements Level 3 fair value is estimated using unobservable inputs that are not based on observable market data. 37. FAIR VALUE DISCLOSURES (CONT'D.) Fair value information (cont'd.) Level 3 fair value measurements (cont'd.) The following table shows the information about fair value measurements using significant unobservable inputs within Level 3 of the fair value hierarchy: Group Corporation Fair value at 31 December 2018 Fair value at 31 December 2017 Fair value at 31 December 2018 Fair value at 31 December 2017 Valuation techniques Unobservable inputs RM'000 RM'000 RM'000 RM'000 Assets measured at fair value Non-current assets held for sale - Ships - 123,003  - 40,595 Market comparable approach Transacted comparable ships adjusted for the current condition of the assets/Sales price offered by potential buyers. Financial assets not measured at fair value Long term receivables 98,789  104,182  -  - Discounted cash flow method Discounting expected future cash flows applying market rate of interest at the end of the reporting period. Finance lease receivables 15,871,938 13,470,279  -  - Discounted cash flow method Discounting expected future cash flows applying latest estimated borrowing rate of the charterers. 15,970,727 13,574,461 -  -  An increase in market values of comparable assets used in the above valuation would result in an increase in the fair values and vice versa.