NTUC Income AR 2019

Valuation of other financial assets classified as Level 3 under the fair value hierarchy (Refer to Note 4(f), 11 and 32 to the financial statements) The key audit matter The Group’s investment portfolio (including other financial assets in assets held for sale) represents more than 87% of its total assets. Of the financial instruments that are carried at fair value in the Group’s consolidated financial statements as at 31 December 2019, the areas that involved significant judgement were the valuation of unquoted funds, debt and equities, representing approximately 6% of the Group’s total investments. These financial instruments are classified as Level 3 in the fair value hierarchy, where their fair values are measured using significant unobservable inputs such as the net asset value of the investee funds or companies. How was the matter addressed in our audit We assessed whether fair values of the Level 3 financial instruments are reasonable by performing the following procedures: • Discussed with management on the valuation approaches for these Level 3 instruments to assess the appropriateness of the basis of valuations; • Reviewed management's sensitivity analysis in respect of the key assumptions used to assess the impact, if any, to the valuation; • Obtained independent confirmations to ascertain the reliability of inputs used in the valuations; • Evaluated the reliability of valuation approaches used in the valuation of Level 3 instruments by performing look-back procedures to compare prior year inputs to the investees’ audited financial statements; and • Assessed the adequacy of disclosures in the financial statements on the fair value measurement basis. Findings The valuation methods applied are in line with generally accepted market practices and the valuations are consistent with external net assets valuation reports. We also found that the disclosures on fair value measurement (Note 4(f)) to be in accordance with relevant requirements. INDEPENDENT AUDITORS’ REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 ANNUAL REPORT 2019 37