281 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2023 ACCOUNTABILITY (FINANCIAL STATEMENTS) 39. Fair value measurement (continued) (a) Fair value hierarchy (continued) The Group and the Company classify fair value measurement using the fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: 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; and Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. There were no transfers between Levels 1 and 2 and between Levels 2 and 3 during the current financial year. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group and the Company use a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used to estimate fair value for long-term debt for disclosure purposes. Other techniques, such as estimated discounted cash flows, are used to determine the fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of foreign exchange forward contracts is calculated using observable forward exchange rates at the end of the reporting period, with the resulting value discounted to present value. The fair value of investment funds is determined based on independent fund valuations. These investments are classified as Level 2 and comprise other investments and derivative financial instruments. In infrequent circumstances, where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are classified as Level 3. (b) Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The following are classes of the Group’s and the Company’s financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value: Note Trade and other receivables 24 Loans and borrowings 32 Trade and other payables 35 The carrying amounts of financial assets and financial liabilities are reasonable approximation of fair values, either due to short-term nature or those floating rate instruments that are re-priced to market interest rates on or near the reporting date. The carrying amounts of non-current receivables are reasonable approximations of fair values. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs. The carrying amounts of the current portion of loans and borrowings are reasonable approximation of fair values due to the insignificant impact of discounting.
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