Barclays 2013 Annual Report Download - page 315

Note 18: Fair value of assets and liabilities continued
Issued debt
Description: This category contains Barclays issued notes.
Valuation: Fair valued Barclays issued notes are valued using discounted cash flow techniques and industry standard models incorporating various
observable input parameters depending on the terms of the instrument.
Observability: Barclays issued notes are generally observable. Structured notes are debt instruments containing embedded derivatives. Where
either an input to the embedded derivative or the debt instrument is deemed unobservable and significant to the overall valuation of the note, the
structured note is classified as Level 3.
Level 3 sensitivity: Sensitivity to the unobservable input in the embedded derivative is calculated in line with the method used for the derivative
instrument concerned and incorporated within the derivative lines.
Equity cash products
Description: This category includes listed equities, Exchange Traded Funds (ETF) and preference shares.
Valuation: Valuation of equity cash products is primarily determined through market observable prices.
Observability: Prices are generally observed in the market. Where a price for an equity security is not available, the instrument is considered
unobservable.
Level 3 sensitivity: Sensitivity relating to unobservable market prices is based on the dispersion of observable proxy prices.
Funds and fund linked products
Description: This category includes holdings in hedge funds, and funds of funds.
Valuation: In general, fund holdings are valued based on the latest available valuation received from the fund administrator. In the case of illiquid
fund holdings the valuation will take account of all available information in relation to the underlying fund or collection of funds and may be
adjusted relative to the performance of relevant index benchmarks.
Observability: Funds are deemed unobservable where the fund is either suspended, in wind-down, has a redemption restriction that severely
affects liquidity, or where the latest net asset value from the fund administrators is older than the frequency dictated by the fund offering
documents.
Level 3 sensitivity: Sensitivity is calculated on an individual fund basis using a loss based scenario approach which factors in the underlying assets
of the specific fund and assumed recovery rates.
Private equity investments
Description: This category includes private equity investments.
Valuation: Private equity investments are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’. This
requires the use of a number of individual pricing benchmarks such as the prices of recent transactions in the same or similar entities, discounted
cash flow analysis, and comparison with the earnings multiples of listed comparative companies. Full valuations are generally performed at least
bi-annually, with the positions reviewed periodically for material events that might impact upon fair value. The valuation of unquoted equity
instruments is subjective by nature. However, the relevant methodologies are commonly applied by other market participants and have been
consistently applied over time.
Observability: Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates.
Level 3 sensitivity: The relevant valuation models are each sensitive to a number of key assumptions, such as projected future earnings,
comparator multiples, marketability discounts and discount rates. Valuation sensitivity is estimated by flexing such assumptions to reasonable
alternative levels and determining the impact on the resulting valuation.
Physical commodities
Description: This category includes physical commodities such as metals and crude oil.
Valuation: The fair values of physical commodities are primarily determined through market observable prices.
Observability: Physical commodities are generally observable.
Level 3 sensitivity: There is no Level 3 sensitivity associated with physical commodities as inputs to valuation are observable.
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