Page 89 - Continental Reinsurance 2022 Annual Report
P. 89
Statement of Significant Accounting Policies 87
The fair value of an asset or a liability is measured interest. The fair value of fixed interest bearing
using the assumption that market participant would deposits is estimated using discounted cash flow
use when pricing the asset or liability, assuming that techniques. Expected cash flows are discounted at
market participant’s act in their economic best current market rates for similar instruments at the
interest. reporting date.
A fair value measurement of a non-financial asset If the fair value cannot be measured reliably, these
takes into account a market participant’s ability to financial instruments are measured at cost, being the
generate economic benefits by using the asset in its fair value of the consideration paid for the acquisition
highest and best use or by selling it to another market of the investment or the amount received on issuing
participant that would use the asset in its highest and the financial liability. All transaction costs directly
best use. attributable to the acquisition are also included in the
cost of the investment.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements are 2.14 Impairment of non-financial assets
categorised within the fair value hierarchy, described Assets are reviewed for impairment whenever events
as follows, based on the lowest input that is significant or changes in circumstances indicate that the carrying
to the fair value measurement as a whole: amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s
• Level 1 - Quoted (unadjusted) market prices in carrying amount exceeds its recoverable amount. The
active markets for identical assets or liabilities. recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the
• Level 2 - Valuation techniques for which the lowest purposes of assessing impairment, assets are grouped
level input that is significant to the fair value at the lowest levels for which there have separately
measurement is directly or indirectly observable. identifiable cash inflows (cash-generating units). The
impairment test also can be performed on a single asset
• Level 3 - Valuation techniques for which the lowest when the fair value less cost to sell or the value in use
level input that is significant to the fair value can be determined reliably.
measurement is unobservable.
Impairment losses of continuing operations are
The fair value of financial instruments that are actively recognised in the profit or loss in those expense
traded in organized financial markets is determined by categories consistent with the nature of the impaired
reference to quoted market bid prices for assets and asset.
offer prices for liabilities, at the close of business on
the reporting date, without any adjustment for Non-financial assets other than goodwill that suffered
transaction costs. impairment are reviewed for possible reversal of the
impairment at each reporting date.
2.13.6 Determination of fair value (continued)
Impairment losses recognised in prior periods are
For other financial instruments other than investment assessed at each reporting date for any indications that
in equity instruments not traded in an active market, the loss has decreased or no longer exists. An
the fair value is determined by using appropriate impairment loss is reversed if there has been a change
valuation techniques. Valuation techniques include in the estimates used to determine the recoverable
the discounted cash flow method, comparison to amount. An impairment loss is reversed only to the
similar instruments for which market observable prices extent that the asset’s carrying amount does not
exist and other relevant valuation models. exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no
Their fair value is determined using a valuation model impairment loss had been recognised. An impairment
that has been tested against prices or inputs to actual loss in respect of goodwill is not reversed.
market transactions and using the Group’s best
estimate of the most appropriate model assumptions. The Group bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
The fair value of floating rate and overnight deposits separately for each of the Group’s CGUs to which the
with credit institutions is their carrying value. The individual assets are allocated. These budgets and
carrying value is the cost of the deposit and accrued forecast calculations generally cover a period of five
