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18 FINANIAL INSTRUMENTS FAIR VALUE RISK ONTINUED
FAIR VALUE HIERARHY
The far values shown above have been classfed nto three categores dependng on the nputs used n the valuaton technque
Thecategories used are as follows:
• Level 1: quoted prices for identical instruments;
• Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and
• Level 3: inputs which are not based on observable market data.
For assets and liabilities which are carried at fair value, the classification of fair value calculations by category is summarised below:
Notes
 mllon
Level 1
2014
€ million
Level 1
2013
 mllon
Level 2
2014
€ million
Level 2
2013
 mllon
Level 3
2014
€ million
Level 3
2013
 mllon
Total far
value
2014
€ million
Total fair
value
2013
Assets at far value
Other cash equivalents 17A – – 221 91 – – 221 91
Available-for-sale financial assets 17A 15 8 158 276 498 476 671 760
Financial assets at fair value
through profit or loss:
Derivatives(a) 16C – – 417 376 – – 417 376
Other 17A 119 25 – – 3 7 122 32
Labltes at far value
Derivatives(b) 16C ––(514) (395) ––(514) (395)
(a) Includes €121 million (2013: €82 million) derivatives, reported within trade receivables, that hedge trading activities.
(b) Includes €(164) million (2013: €(96) million) derivatives, reported within trade payables, that hedge trading activities.
There were no significant changes in classification of fair value of financial assets and financial liabilities since 31 December 2013.
There were also no significant movements between the fair value hierarchy classifications since 31 December 2013.
The fair value of trade receivables and payables is considered to be equal to the carrying amount of these items due to their
short-term nature.
Reconciliation of Level 3 fair value measurements of financial assets is given below:
Reconclaton of movements n Level 3 valuatons
 mllon
2014
€ million
2013
1 January 483 506
Gains and losses recognised in profit and loss (3) 2
Gains and losses recognised in other comprehensive income 17 (5)
Purchases and new issues 4 29
Sales and settlements – (49)
Transfers into Level 3 – –
Transfers out of Level 3 – –
31 December 501 483
SINIFIANT UNOBSERVABLE INPUTS USED IN LEVEL 3 FAIR VALUES
The only individually material asset valued using Level 3 techniques is a particular unlisted investment with a carrying value at year end
of €189 million (2013: €190 million). A change in one or more of the inputs to reasonably possible alternative assumptions would not
change fair value significantly.
ALULATION OF FAIR VALUES
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate
the fair values are consistent with those used in the year ended 31 December 2013.
ASSETS AND LIABILITIES CARRIED AT FAIR VALUE
• The fair values of quoted investments falling into Level 1 are based on current bid prices.
• The fair values of unquoted available-for-sale financial assets are based on recent trades in liquid markets, observable market
rates, discounted cash flow analysis and statistical modelling techniques such as Monte Carlo simulation. If all significant inputs
required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs
is not based on observable market data, the instrument is included in Level 3.
• Derivatives are valued using valuation techniques with market observable inputs. The models incorporate various inputs including
the credit quality of counter-parties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the
underlying commodities.
• For listed securities where the market is not liquid, and for unlisted securities, valuation techniques are used. These include the use of
recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow calculations.
122 Unilever Annual Report and Accounts 2014Financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP CONTINUED