Page 198 - EXIM-BANK-AR20

196 EXIM BANK MALAYSIA
Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS

42. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.)
Fair values (cont’d.)

(ii) Financial assets and liabilities carried at fair value (cont’d.)
Derivative financial assets/liabilities
The fair value is based on quoted market price or marked to model valuation.

Borrowings (Hedged items)
The fair value is based on marked to model valuation.

(iii) Financial assets and liabilities not carried at fair value
The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

Financial investments at amortised cost
For non actively traded financial investments, independent broker quotations are obtained. Fair values of equity financial
investments are estimated using a number of methods, including earning multiples and discounted cash flows analysis.
Where discounted cash flows technique is used, the estimated future cash flows are discounted using applicable prevailing
market or indicative rates of similar instruments at the reporting date.

Loans, advances and financing
Loans, advances and financing to borrowers/customers, where such market prices are not available, various methodologies
have been used to estimate the approximate fair values of such instruments. These methodologies are significantly affected
by the assumptions used and judgements made regarding risk characteristics of various financial instruments, discount
rates, estimates of future cash flows, future expected loss experience and other factors. Changes in the assumptions
could significantly affect these estimates and the resulting fair value estimates. Therefore, for a significant portion of the
Group’s and the Bank’s financial instruments, including loans, advances and financing to customers, their respective fair
value estimates do not purport to represent, nor should they be construed to represent, the amount that the Group and the
Bank could realise in a sale transaction at the reporting date.
The fair values of variable rate loans/financing are estimated to approximate their carrying values. For fixed rate loans and
Islamic financing, the fair values are estimated based on expected future cash flows of contractual instalment payments,
discounted at applicable and prevailing rates at reporting date offered for similar facilities to new borrowers/customers with
similar credit profiles. In respect to impaired loans/financing, the fair values are deemed to approximate the carrying values
which are net of allowances for stage 3 ECL.
Investment properties
The fair values of investment properties are estimated based on comparison with indicative market value determined by
an accredited independent valuer.
Borrowings (Non-hedged items)

The fair value of variable rate non-concessional borrowings is estimated to approximate the carrying amount.