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4.
5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2018 (CONTINUED)
Due from Agents (continued)
During 2017, a related party issued a promissory note to the Group totaling $2,850,000 (Note 5) in settlement of receivables of equal value. As of 31 December 2018, the Group had balances that are past due totaling $Nil (2017: $Nil) that are impaired, and $1,308,000 (2017: $985,000) with an ageing over 90 days that are past due but not impaired (this excludes balances with network partners and policies under installment arrangements).
Investments in Securities
Financial assets at fair value through profit or loss
The Group ranks its investments in securities based on the hierarchy of valuation techniques required by IFRS, which is determined based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs lead to the following fair value hierarchy:
Level 1 – The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.
Level 2 – The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
Level 3 –If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. This is the case for unlisted equity securities.
This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset.
The determination of what constitutes ‘observable’ requires significant judgement by the Group. The Group considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from the exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These financial instruments are included in Level 1.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2.
Financial instruments classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial instruments include unlisted securities that have significant unobservable components, including investment funds and equity securities. The valuation techniques used for Level 3 investments in securities include net asset values based on audited financial statements and interim financial information, latest trade information and discounted cash flow analyses.