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Fair value of financial instruments | 12 Months Ended
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Dec. 31, 2019
Fair Value Of Financial Instruments |
22. Fair value of financial instruments | The fair value of a financial instrument is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants which takes place in the principal (or most advantageous) market at the measurement date. The fair value of a liability reflects its non-performing risk. Assets and liabilities recorded at fair value in the consolidated statement of financial position are measured and classified in a hierarchy consisting of three levels for disclosure purposes. The three levels are based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:
| • | Level 1: Unadjusted quoted prices in an active market for identical assets and liabilities.
| • | Level 2: Quoted prices in markets that are not active or inputs that are derived from quoted prices of similar (but not identical) assets or liabilities in active markets.
| • | Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities.
(a) Valuation process The Company maximizes the use of quoted prices from active markets, when available. A market is regarded as active if transactions take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Where independent quoted market prices are not available, the Company uses quoted market prices for similar instruments, other third party evidence or valuation techniques. The fair value of financial instruments determined using valuation techniques include the use of recent arm’s length transactions and discounted cash flow analysis for investments in unquoted securities, discounted cash flow analysis for derivatives, third-party pricing models or other valuation techniques commonly used by market participants and utilize independent observable market inputs to the maximum extent possible. The use of valuation techniques to determine the fair value of a financial instrument requires management to make assumptions such as the amount and timing of future cash flows and discount rates and incorporate the Company’s estimate of assumptions that a market participant would make when valuing the instruments. (b) Accounting classifications and fair values The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. There has not been any transfer between fair value hierarchy levels during the year. The fair value disclosure of lease liabilities is also not required.
|  |  |  |  | Carrying amount |  |  | Fair value |
December 31, 2019 |  | Note |  |  | Mandatorily at FVTPL |  |  | Financial asset at amortized cost |  |  | Other financial liabilities |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment portfolio: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | 8 |  |  |  | 20,590 |  |  |  | - |  |  |  | - |  |  |  | 20,590 |  |  |  | - |  |  |  | 99 |  |  |  | 20,491 |  |  |  | 20,590 |
Partnership interest and other |  | 8 |  |  |  | 200 |  |  |  | - |  |  |  | - |  |  |  | 200 |  |  |  | - |  |  |  | - |  |  |  | 200 |  |  |  | 200 |
|  |  |  |  |  | 20,790 |  |  |  | - |  |  |  | - |  |  |  | 20,790 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets not measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalent |  |  |  |  |  | - |  |  |  | 10,417 |  |  |  | - |  |  |  | 10,417 |  |  |  | 10,417 |  |  |  | - |  |  |  | - |  |  |  | 10,417 |
Loans receivable – current |  | 5 |  |  |  | - |  |  |  | 69,949 |  |  |  | - |  |  |  | 69,949 |  |  |  | - |  |  |  | 69,647 |  |  |  | - |  |  |  | 69,647 |
Loans receivable – non-current |  | 5 |  |  |  | - |  |  |  | 34,726 |  |  |  | - |  |  |  | 34,726 |  |  |  | - |  |  |  | - |  |  |  | 34,396 |  |  |  | 34,396 |
|  |  |  |  |  | - |  |  |  | 115,092 |  |  |  | - |  |  |  | 115,092 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities not measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accruals |  |  |  |  |  | - |  |  |  | - |  |  |  | 11,254 |  |  |  | 11,254 |  |  |  | - |  |  |  | 11,253 |  |  |  | - |  |  |  | 11,253 |
Credit facilities |  | 13 |  |  |  | - |  |  |  | - |  |  |  | 76,472 |  |  |  | 76,472 |  |  |  | - |  |  |  | 76,472 |  |  |  | - |  |  |  | 76,472 |
Debentures |  | 14 |  |  |  | - |  |  |  | - |  |  |  | 44,039 |  |  |  | 44,039 |  |  |  | - |  |  |  | 44,867 |  |  |  | - |  |  |  | 44,867 |
Convertible debentures |  | 15 |  |  |  | - |  |  |  | - |  |  |  | 12,373 |  |  |  | 12,373 |  |  |  | - |  |  |  | 12,373 |  |  |  | - |  |  |  | 12,373 |
|  |  |  |  |  | - |  |  |  | - |  |  |  | 144,138 |  |  |  | 144,138 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Carrying amount |  |  | Fair value |
December 31, 2018 |  | Note |  |  | FVTPL |  |  | Financial asset at amortized cost |  |  | Other financial liabilities |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets not measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalent |  |  |  |  |  | - |  |  |  | 20,439 |  |  |  | - |  |  |  | 20,439 |  |  |  | 20,439 |  |  |  | - |  |  |  | - |  |  |  | 20,439 |
Loans receivable – current |  | 5 |  |  |  | - |  |  |  | 62,439 |  |  |  | - |  |  |  | 62,439 |  |  |  | - |  |  |  | 62,439 |  |  |  | - |  |  |  | 62,439 |
Loans receivable – non-current |  | 5 |  |  |  | - |  |  |  | 39,317 |  |  |  | - |  |  |  | 39,317 |  |  |  | - |  |  |  | - |  |  |  | 41,595 |  |  |  | 41,595 |
|  |  |  |  |  | - |  |  |  | 122,195 |  |  |  | - |  |  |  | 122,195 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial liability |  | 24 | d |  |  | 964 |  |  |  | - |  |  |  | - |  |  |  | 964 |  |  |  | - |  |  |  | 964 |  |  |  | - |  |  |  | 964 |
|  |  |  |  |  | 964 |  |  |  | - |  |  |  | - |  |  |  | 964 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial liabilities not measured at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accruals |  |  |  |  |  | - |  |  |  | - |  |  |  | 9,454 |  |  |  | 9,454 |  |  |  | - |  |  |  | 9,454 |  |  |  | - |  |  |  | 9,454 |
Credit facilities |  | 13 |  |  |  | - |  |  |  | - |  |  |  | 76,465 |  |  |  | 76,465 |  |  |  | - |  |  |  | 76,465 |  |  |  | - |  |  |  | 76,465 |
Debentures |  | 14 |  |  |  | - |  |  |  | - |  |  |  | 42,156 |  |  |  | 42,156 |  |  |  | - |  |  |  | 44,782 |  |  |  | - |  |  |  | 44,782 |
Convertible debentures |  | 15 |  |  |  | - |  |  |  | - |  |  |  | 11,889 |  |  |  | 11,889 |  |  |  | - |  |  |  | 11,889 |  |  |  | - |  |  |  | 11,889 |
|  |  |  |  |  | - |  |  |  | - |  |  |  | 139,964 |  |  |  | 139,964 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(c) Measurement of fair values: (i) Valuation techniques and significant unobservable input The following tables show the valuation techniques used in measuring Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used. Financial instrument measured at FV
Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and FV
Investment portfolio: |  |  |
Equities |  |  |
Unlisted | • Price of recent investments in the investee company • Implied multiples from recent transactions of the underlying investee companies • Offers received by investee companies • Revenue multiples derived from comparable public companies and transactions • Option pricing model | • Third-party transactions • Revenue multiples • Balance sheets and last twelve-month revenues for certain of the investee companies • Equity volatility • Time to exit events | • Increases in revenue multiples increases fair value • Increases in equity volatility can increase or decrease fair value depending on class of shares held in the investee company • Increases in estimated time to exit event can increase or decrease fair value depending on class of shares held in the investee company
Partnership interest and others | • Adjusted net book value | • Net asset value per unit • Change in market pricing of comparable companies of the underlying investments made by the partnership |
Loan receivable – non-current | • Discounted cash flows: Considering expected prepayments and using management’s best estimate of average market interest rates with similar remaining terms. | • Expected timing of cash flows • Discount rate 12% | • Changes to the expected timing of cash flow changes fair value • Increases to the discount rate can decrease fair value
The following table presents the changes in fair value measurements of the Company’s investment portfolio recognized at fair value at December 31, 2019 and classified as Level 3:
|  | December 31, 2019 |  |  | December 31, 2018 |
Opening balance December 31, 2018 |  |  | - |  |  |  | - |
Acquired in business combination with Difference |  |  | 22,648 |  |  |  | - |
Disposal |  |  | (2,100 | ) |  |  | - |
Repayment of debenture |  |  | (14 | ) |  |  | - |
Unrealized gain on investment portfolio |  |  | 157 |  |  |  |  |
Balance, end of period |  |  | 20,691 |  |  |  | - |
(ii) Sensitivity analysis For the fair value of equity securities, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.
|  |  | Profit or loss |
|  |  | Increase |  |  | Decrease |
Investment portfolio: |  |  |  |  |  |  |
31 December 2019 |  |  |  |  |  |  |
| Adjusted market multiple (5% movement) |  |  | 1,000 |  |  |  | (1,000 | )
31 December 2018 | Not applicable |  |  |  |  |  |  |  |
During the year ended December 31, 2019, there were no transfers of assets or liabilities within the fair value hierarchy levels.

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