Page 205 - ACCESS BANK ANNUAL REPORTS_eBook

(ii) Determination of fair value of financial instruments.

Valuation techniques used to derive Level 2 fair values
Level 2 fair values of investments have been generally derived using the Market approach.
Below is a table showing sensitivity analysis of material unquoted investments categorised as Level 2 fair values.

Description Fair value at Valuation Observable Fair value Fair value Relationship
31 December Technique Inputs if inputs if inputs of unobserv-
2017 increased by decreased by able inputs to
5% 5% fair value
Investment in 8,760,176 Fair value “Share price 9,198,185 8,322,167 The higher the
MTN through quot- from last trade share price
ed share price date as at the last
as at last trade trade date, the
date. Number of higher the fair
units owned by value
Access bank”
Derivative fi- 93,419,293 Forward and Market rates 5,312,953 (5,312,953) The higher the
nancial assets swap: Fair from quoted market rate,
Derivative 5,332,177 value through market the higher the
financial liabil- market rate fair value of
ities from a quoted the deriva-
market tive financial
Futures: Fair instrument
value through
reference
market rate

Valuation techniques used to derive Level 3 fair values
Level 3 fair values of investments have been generally derived using the adjusted fair value comparison approach. Quoted
price per earning or price per book value, enterprise value to EBITDA ratios of comparable entities in a similar industry
were obtained and adjusted for key factors to reflect estimated ratios of the investment being valued. Adjusting factors
used are the Illiquidity Discount which assumes a reduced earning on a private entity in comparison to a publicly quoted
entity and the Haircut adjustment which assumes a reduced earning for an entity located in Nigeria contributed by lower
transaction levels in comparison to an entity in a developed or emerging market.

Descrip- Fair value Valuation Observ- Fair value Fair value Fair value Fair value Relation-
tion at 31 Technique able Inputs if inputs if inputs if unob- if unob- ship of un-
December increased decreased servable servable observable
2017 by 5% by 5% inputs inputs inputs to
increased decreased fair value
by 5% by 5%
Investment 50,882,911 Adjusted Aver- 53,427,057 48,338,765 53,427,057 48,338,765 The higher
in Africa fair value age P/B the illiquid-
Finance comparison multiples of ity ratio
Corpora- approach comparable and the
tion companies earnings
per share
haircut
adjustment
the higher
the fair
value

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Annual Report & Accounts 2017