Page 115 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 113

Signifcant assumptions and estimates used to determine the fair values:

Financial assets

As cash and cash equivalents and receivables due from other banks are short term in nature or are receivable on demand, their carrying value approximates their fair value.

The carrying value of Banking loans, advances and other receivables is net of specifc and collective provisions for

impairment. For variable rate loans, excluding impaired loans, the carrying amount is considered a reasonable estimate of fair value. The fair value for fxed rate loans was calculated by utilising discounted cash fow models to determine the net present value of the portfolio future principal and interest cash fows, based on the interest rate repricing of the loans. The discount rates applied were based on the rates offered by Banking on current products with similar maturity dates.

For all other fnancial assets, the carrying value (amortised cost) is considered to be a reasonable estimate of fair value.

Financial liabilities

The carrying value at balance date of non-interest bearing, call and variable rate deposits, and fxed rate deposits repricing within six months, is the fair value. Discounted cash fow models are used to calculate the fair value of other term deposits based upon deposit type and related maturities. As the payables due to other banks are short term in nature, their carrying value approximates fair value.

The fair value of debt issues, subordinated notes and preference shares are calculated based on either the quoted market prices at balance date or, where quoted market prices were not available, a discounted cash fow model using a yield curve appropriate to the remaining maturity of the instrument.

For all other fnancial liabilities which are short term in nature, the carrying value (amortised cost) is considered to be a reasonable estimate of fair value. For longer term liabilities, fair values have been estimated using the rates currently offered by Banking for similar liabilities with similar remaining maturities.

25.2 Fair value hierarchy

Financial assets and liabilities that are recognised and measured at fair value are categorised by a hierarchy which identifes the most signifcant input used in the valuation methodology:

–– Level 1 – derived from quoted prices (unadjusted) in active markets for identical fnancial instruments

–– Level 2 – derived from other than quoted prices included within Level 1 that are observable for the fnancial instruments, either directly or indirectly; or

–– Level 3 – fair value measurement is not based on observable market data.

CONSOLIDATED

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2011 2011 2011 2011 2010 2010 2010 2010 $m $m $m $m $m $m $m $m

Financial assets

Trading securities – 4,952 – 4,952 – 8,233 – 8,233 Investment securities 3,375 20,601 38 24,014 3,108 17,916 67 21,091 Derivatives 3 128 35 166 2 783 48 833 3,378 25,681 73 29,132 3,110 26,932 115 30,157

Financial liabilities

Deposits and

short-term borrowings 1 – (3,840) – (3,840) – (1,029) – (1,029) Derivatives (3) (2,413) (164) (2,580) (1) (2,292) (168) (2,461) Managed funds units on issue (26) (672) (3) (701) (225) (209) (3) (437) (29) (6,925) (167) (7,121) (226) (3,530) (171) (3,927)

There have been no signifcant transfers between Level 1 and Level 2 during the fnancial year (2010: nil).

Note

1 Only includes short-term offshore borrowings designated as fnancial liabilities at fair value through proft or loss.