Holiday Inn 2012 Annual Report Download - page 116

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114 IHG Annual Report and Financial Statements 2012
21. Financial risk management continued
Fair values
The table below compares carrying amounts and fair values of the Group’s financial assets and liabilities.
2012 2011
Carrying Carrying
value Fair value value Fair value
Note $m $m $m $m
Financial assets
Equity securities available-for-sale* 15 112 112 112 112
Derivatives* 23 2 2 3 3
Loans and receivables:
Cash and cash equivalents 18 195 195 182 182
Other financial assets 15 49 49 44 44
Trade and other receivables, excluding prepayments 17 362 362 327 327
Financial liabilities
£250m 6% bonds 2016 22 (403) (456) (384) (411)
£400m 3.875% bonds 2022 22 (638) (652) – –
Finance lease obligations 22 (212) (268) (209) (268)
Other borrowings 22 (5) (5) (98) (98)
Trade and other payables 19 (1,272) (1,272) (1,204) (1,204)
Derivatives* 23 (19) (19) (39) (39)
Provisions 20 (2) (2) (14) (14)
* Financial assets and liabilities which are measured at fair value.
The fair value of cash and cash equivalents approximates book value due to the short maturity of the investments and deposits. Equity
securities available-for-sale and derivatives are held in the Group statement of financial position at fair value as set out in notes 15 and 23.
The fair value of other financial assets approximates book value based on prevailing market rates. The fair value of borrowings, excluding
finance lease obligations and the fixed rate bonds, approximates book value as interest rates reset to market rates on a frequent basis.
The fair value of the £250m and £400m bonds is based on their quoted market price. The fair value of finance lease obligations is calculated
by discounting future cash flows at prevailing interest rates. The fair value of trade and other receivables, trade and other payables and
current provisions approximates to their carrying value, including the future redemption liability of the Group’s loyalty programme.
Fair value hierarchy
The Group uses the following valuation hierarchy to determine the carrying value of financial instruments that are measured at fair value:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
2012 2011
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
$m $m $m $m $m $m $m $m
Assets
Equity securities available-for-sale 18 – 94 112 15 – 97 112
Derivatives – 2 – 2 – 3 – 3
Liabilities
Derivatives – (19) – (19) – (39) – (39)
There were no transfers between Level 1 and Level 2 fair value measurements during the year and no transfers into and out of Level 3.
Notes to the Group Financial Statements continued