Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 101 Notes to the Financial Statements 31 December 2016 (cont’d) 31. FINANCIAL INSTRUMENTS (cont’d) (c) Methods and assumptions used to estimate fair value (cont’d) (ii) Other receivables (amount owing by a subsidiary) and long-term borrowings The fair values of these financial instruments are estimated by discounting the expected future cash flows at market lending rates for similar types of lending, borrowing or leasing arrangements at the end of the reporting period. At the end of the reporting period, these amounts are carried at amortised costs and the carrying amounts are approximate to their fair values. (iii) Short term funds The fair values of short term funds are determined by reference to the exchange quoted market bid prices at the close of the business at the end of each reporting period. (d) Fair value hierarchy Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. In respect of borrowings, the market rate of interest is determined by reference to similar borrowing arrangements. Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). The significant unobservable inputs used in determining the fair value measurement of Level 3 financial instruments as well as the relationship between key unobservable inputs and fair value, is detailed in the table below: Financial instruments Valuation technique used Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value Financial assets Amount owing by a subsidiary Discounted cash flows method Discount rate (1.75% to 6.60%) The higher the discount rate, the lower the fair value of the financial assets would be.