Audi 2014 Annual Report Download - page 259

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
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35 / ADDITIONAL DISCLOSURES ON FINANCIAL
INSTRUMENTS IN THE BALANCE SHEET
35.1 / FINANCIAL INSTRUMENTS
MEASURED AT FAIR VALUE
Measurement of financial instruments at fair value is based on
a three-level hierarchy and on the proximity of the measurement
factors used to an active market. An active market is one in
which homogeneous products are traded, where willing buyers
and sellers can be found for them at all times, and where their
prices are publicly available.
Level 1 of the fair value hierarchy involves the measurement
of financial instruments, such as securities, listed on active
markets.
Level 2 involves the measurement of financial instruments such
as derivatives, where the fair value is calculated using measure-
ment processes based on observable market data. Particular
use is made of exchange rates, interest rates and commodity
prices, which can be observed on the corresponding markets
and are acquired via price service agencies.
Within the Audi Group, level 3 mainly covers residual value
hedging arrangements with the retail trade. The input factors
for measuring the future development of used car prices can-
not be observed on active markets; they are forecast by various
independent institutions. The residual value hedging model is
explained in Note 36.4, “Market risks.”
Furthermore, non-current commodity futures are also measured
according to level 3, as the long-term nature of the contracts
means that the key parameters for their measurement need to
be extrapolated. The extrapolation for the different commodities
is carried out on the basis of observable input factors, acquired
via price service agencies. Rights to acquire shares in companies
are also assigned to fair value level 3, as there are no available
input factors for measurement derived from active markets.
For the purposes of measuring equity instruments, particular
use is made of the respective company plans and the specific
discounting rates.