Merck 2014 Annual Report Download - page 246

241CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
Level 3 assets comprise investments in equity instruments classified
as available-for-sale. These include interests in InfraServ GmbH &
Co. Wiesbaden KG, Germany, which were acquired in the context
of the acquisition of AZ Electronics Materials S.A. The fair values
of these interests were determined using a discounted cash flow
method where expected future cash flows from dividends are taken
into account.
Counterparty credit risk is taken into consideration for all val-
uations. In the case of non-derivative financial instruments, such
as other liabilities or interest-bearing securities, this is reflected
using risk-adequate premiums on the discount rate, while discounts
on market value (so-called credit valuation adjustments and debit
valuation adjustments) are used for derivatives.
The fair value of available-for-sale investments in equity instru-
ments with a carrying amount of €66.9million (2013: €52.3mil-
lion) could not be reliably determined. They were measured at cost.
There is no intention to sell these financial instruments.
The fair values of the financial instruments disclosed in the
balance sheet and the fair values deviating substantially from the
carrying amount were determined as follows:
€ million
as of Dec. 31, 2014 Assets Liabilities
Fair value determined by official prices and quoted market values (Level 1) 1,178.6 4,970.2
thereof available-for-sale 1,178.6 –
thereof other liabilities – 4,970.2
Fair value determined using inputs observable in the market (Level 2) 1,470.1 1,053.8
thereof available-for-sale 958.9 –
thereof derivatives with a hedging relationship 470.7 157.3
thereof derivatives without a hedging relationship 40.5 31.1
thereof other liabilities – 865.4
Fair value determined using inputs unobservable in the market (Level 3) 11.3 –
thereof available-for-sale 11.3 –
€ million
as of Dec. 31, 2013 Assets Liabilities
Fair value determined by official prices and quoted market values (Level 1) 1,396.5 3,414.3
thereof available-for-sale 1,396.5 –
thereof other liabilities – 3,414.3
Fair value determined using inputs observable in the market (Level 2) 1,069.6 563.8
thereof available-for-sale 920.6 –
thereof derivatives with a hedging relationship 139.3 57.1
thereof derivatives without a hedging relationship 9.7 4.4
thereof other liabilities – 502.3
Fair value determined using inputs unobservable in the market (Level 3) – –