Notes to the Financial Statements
(Cont’d)
For the year ended 30 April 2015
(In Singapore Dollars)
97
STAMFORD TYRES CORPORATION LIMITED
BUILDING ON OUR EXTENSIVE NETWORK
37. Fair value of financial instruments (cont’d)
(a)
Fair value of financial instruments that are carried at fair value (cont’d)
Fair value hierarchy
The Group classify fair value measurement using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements.The fair value hierarchy have the following levels:
z
Level 1
– Quoted prices (unadjusted) in active markets for identical assets or liabilities
z
Level 2
– 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), and
z
Level 3
– Inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
Determination of fair value
Forward currency contracts and interest rate swaps are valued using a valuation technique with
market observable inputs. The most frequently applied valuation techniques include forward pricing
and swap models, using present value calculations. The models incorporate various inputs including
the foreign exchange spot and forward rates, interest rate curves and forward rate curves.
(b)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are reasonable approximation of fair value
The management has determined that the carrying amounts of cash and short-term deposits,
current trade and other receivables, current trade and other payables and current bank loans
based on their notional amounts, reasonably approximate their fair values because these are
mostly short-term in nature or are re-priced frequently within a year.
The estimated fair values of the Group’s and Company’s borrowings approximates their carrying
amounts, based on borrowing rates which would be available to the Company at the end of each
reporting period.
(c)
Fair value of financial instruments by classes that are not carried at fair value and whose carrying
amounts are not reasonable approximation of fair value
The Company has non-current interest-free receivables extended to subsidiary companies, which
either form part of the Company’s net investment in subsidiary companies or are not expected to
be repaid until the cash flows of the subsidiary companies permit. It is impractical to determine the
fair value of these receivables as the timing of the future cash flow repatriation cannot be estimated
reliably.Therefore, such loans are carried at cost.
