NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 4. Management of insurance and financial risks (continued) (f) Fair value measurements (continued) The fair value of Level 2 financial instruments, which are not traded in an active market (for example, over- the-counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting 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 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. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the reporting date. In infrequent circumstances, where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are included in Level 3. The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. During the financial year ended 31 December 2018, the Group’s investments in debt securities measured at fair value through profit or loss or as available-for-sale were transferred from level 2 to level 1 due to the availability of additional pricing sources. The carrying amount of these transferred investments as at 31 December 2018 were $85.7 million and $8.0 million respectively. There were no transfers from Level 1 to Level 2 in 2018 and no transfers in either direction in 2017. The following table presents the changes in Level 3 instruments: 2018 Fair value through profit or loss Available-for-sale investments Debt securities $’000 Unquoted funds $’000 Unquoted equities $’000 Total $’000 At 1 January 902 1,746,242 41,538 1,788,682 Sales of Level 3 securities – (250,461) – (250,461) Purchases of Level 3 securities – 290,689 – 290,689 Revaluation reserve – 39,396 1,838 41,234 Gains or losses recognised in profit or loss (101) 109,606 (134) 109,371 At 31 December 801 1,935,472 43,242 1,979,515 During the financial year ended 31 December 2018, there was no transfer of investments in and out of Level 3 of the fair value hierarchy. 2017 Fair value through profit or loss Available-for-sale investments Debt securities $’000 Unquoted funds $’000 Unquoted equities $’000 Total $’000 At 1 January 1,117 1,516,449 42,548 1,560,114 Sales of Level 3 securities – (311,573) – (311,573) Purchases of Level 3 securities – 440,746 – 440,746 Revaluation reserve – 3,637 (1,144) 2,493 Gains or losses recognised in profit or loss (215) 96,983 134 96,902 At 31 December 902 1,746,242 41,538 1,788,682 During the financial year ended 31 December 2017, there was no transfer of investments in and out of Level 3 of the fair value hierarchy. 87 2018 ANNUAL REPORT