Barclays 2012 Annual Report Download - page 262

18 Fair value of financial instruments continued
Valuation technique using significant unobservable inputs – Level 3
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data
(unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is
compelling external evidence demonstrating an executable exit price. An input is deemed significant if it is shown to contribute more than 10% to
the valuation of a financial instrument.
Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical
techniques.
The Level 3 category includes certain corporate debt securities, distressed debt, private equity investments, commercial real estate loans, certain
OTC derivatives (requiring complex and unobservable inputs such as correlations and long dated volatilities), certain convertible bonds, certain
CDS, derivative exposures to monoline insurers, certain fund units, certain asset backed securities, certain issued notes, certain CDOs (synthetic
and some cash underlyings), certain CLOs and certain loans.
The following table shows the Group’s financial assets and liabilities that are held at fair value analysed by level within the fair value hierarchy.
Financial assets and liabilities held at fair value
Valuation technique using
Quoted
market
prices
(Level 1)
£m
Observable
inputs
(Level 2)
£m
Significant
unobservable
inputs
(Level 3)
£m
Total
£m
As at 31 December 2012
Trading portfolio assets 51,614 85,930 7,486 145,030
Financial assets designated at fair value 14,405 25,705 5,951 46,061
Derivative financial assets 2,864 460,139 6,143 469,146
Available for sale investments 28,946 43,283 2,880 75,109
Total assets 97,829 615,057 22,460 735,346
Trading portfolio liabilities (20,270) (24,522) (2) (44,794)
Financial liabilities designated at fair value (181) (75,866) (2,233) (78,280)
Derivative financial liabilities (2,668) (454,896) (4,904) (462,468)
Total Liabilities (23,119) (555,284) (7,139) (585,542)
As at 31 December 2011
Trading portfolio assets 61,530 81,449 9,204 152,183
Financial assets designated at fair value 4,179 24,091 8,679 36,949
Derivative financial assets 2,550 525,147 11,267 538,964
Available for sale investments 30,857 34,761 2,873 68,491
Total assets 99,116 665,448 32,023 796,587
Trading portfolio liabilities (26,155) (19,726) (6) (45,887)
Financial liabilities designated at fair value (39) (84,822) (3,136) (87,997)
Derivative financial liabilities (2,263) (517,066) (8,581) (527,910)
Total Liabilities (28,457) (621,614) (11,723) (661,794)
Transfers from Level 1 to Level 2 primarily comprised certain government bonds and equity products, as a result of regular observability
reassessments.
barclays.com/annualreport260 I Barclays PLC Annual Report 2012
Notes to the financial statements
For the year ended 31 December 2012 continued