Voya 2014 Annual Report Download - page 307

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
4. Fair Value Measurements (excluding Consolidated Investment Entities)
Fair Value Measurement
The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs
to the valuation technique, pursuant to ASU 2011-04, “Fair Value Measurements (ASC Topic 820): Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP” (“ASU 2011-04”).
The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair
value fall within different levels of the hierarchy, the category level is based on the lowest priority level input
that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair
value on the Consolidated Balance Sheets are categorized as follows:
• Level 1—Unadjusted quoted prices for identical assets or liabilities in an active market. The Company
defines an active market as a market in which transactions take place with sufficient frequency and
volume to provide pricing information on an ongoing basis.
• Level 2—Quoted prices in markets that are not active or valuation techniques that require inputs that
are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2
inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Inputs other than quoted market prices that are observable; and
d) Inputs that are derived principally from or corroborated by observable market data through
correlation or other means.
• Level 3—Prices or valuation techniques that require inputs that are both unobservable and significant
to the overall fair value measurement. These valuations, whether derived internally or obtained from a
third party, use critical assumptions that are not widely available to estimate market participant
expectations in valuing the asset or liability.
When available, the estimated fair value of financial instruments is based on quoted prices in active markets that
are readily and regularly obtainable. When quoted prices in active markets are not available, the determination of
estimated fair value is based on market standard valuation methodologies, including discounted cash flow
methodologies, matrix pricing or other similar techniques.
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