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Financial statements 2011
3.6 Fair value of financial assets and
financial liabilities
Fair value is the amount for which an asset could be ex-
changed, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction on the meas-
urement date. When available, the EIF measures the fair
value of an instrument using quoted prices in an active
market for that instrument. A market is regarded as active
if quoted prices are readily and regularly available and
represent actual and regularly occurring market transac-
tions on an arm’s length basis.
The determination of fair value for financial assets and liabil-
ities for which there is no observable market price requires
the use of valuation techniques as described in note 2.3.2.
For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and re-
quires varying degrees of judgment depending on liquid-
ity, concentration, uncertainty of market factors, pricing as-
sumptions and other risks affecting the specific instrument.
PE is an appraised asset class, valued not by the con-
sensus of many market players in an active and efficient
market but by a few experts, normally the fund managers
who value each investment based on their views of the
investment’s earnings potential and/or comparisons with
other investments and in accordance with customary in-
dustry valuation guidelines.
For loans and receivables as well as other liabilities, the
carrying values approximate fair values.
The fair value hierarchy reflects the significance of the in-
puts used in making the measurements. These levels differ
from the category classification mentioned under 2.3.2a:
■
Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities;
■
Level 2: inputs other than quoted prices included with-
in level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices);
■
Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The table below analyses financial instruments measured
at fair value at the end of the reporting period by the
level in the fair value hierarchy into which the fair value
measurement is categorised:
EUR
At 31.12.2011
Level 1
Level 2
Level 3
Total
Financial assets
Financial investments - AFS
776 567 067
2 822 337
207 586 398
986 975 802
Financial assets designated
at fair value through P&L
0
0
3 626 331
3 626 331
776 567 067
2 822 337
211 212 729
990 602 133
At 31.12.2010
Level 1
Level 3
Total
Financial assets
Financial investments - AFS
864 451 939
190 135 993
1 054 587 932
Financial assets designated
at fair value through P&L
0
3 375 484
3 375 484
864 451 939
193 511 477 1 057 963 416
During 2011 one debt security with a fair value of EUR 2 822 337 was transferred from Level 1 to level 2 because
the market for this instrument could not be considered as an active market. However, there was sufficient information
available to measure fair value of this security based on observable market inputs.
Details of the movements of financial assets in 2011 are given in notes 4.2 and 4.3.
There was no transfer of financial assets between Level 1 and Level 3 in 2011 and 2010.
Out of Level 3, disbursements amounted to EUR 41.2m, capi tal repayments amounted to EUR 28.0m
(2010: EUR 12.9m) and terminated deals amounted to EUR 1.1m (2010: EUR 1.7m).