BIMB Integrated Annual Report 2019

50 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) (a) Financial instruments carried at fair value (continued) Valuation processes applied by the Group for Level 3 fair value The Group has an established control framework in respect of the measurement of fair value of financial instruments. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the Chief Investment Officer and Chief Financial Officer. The valuation team regularly reviews significant unobservable inputs and valuation adjustments. Sensitivity analysis for Level 3 Impact on Impact on Impact on Change in profit Impact on operating Participants’ variables after tax equity surplus fund RM’000 RM’000 RM’000 RM’000 2019 Discount rate +1% – (2,450) (10,789) (10,789) Discount rate -1% – 2,564 11,270 11,270 2018 Discount rate +1% – (1,268) (6,212) (6,212) Discount rate -1% – 1,323 6,454 6,454 (b) Financial instruments not carried at fair value The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i) Other financial assets at amortised cost The fair values of securities that are actively traded is determined by quoted bid prices. For non-actively traded securities, the fair values are valued at cost less impairment or estimated using 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. (ii) Financing and advances The fair values of variable rate financing are estimated to approximate their carrying values. For fixed rate 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 with similar credit profiles. In respect of impaired financing, the fair values are deemed to approximate the carrying values which are net of impairment allowances. (iii) Subordinated Sukuk Murabahah and Recourse obligations on financing sold to Cagamas The fair values of subordinated obligations are estimated by discounting the expected future cash flows using the applicable prevailing profit rates of borrowings with similar risk profiles. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 315 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary