(a) Comparison of carrying value to fair value

The table below summarises the carrying amounts and fair values of financial assets and liabilities presented In the Group and Agency’s statement of financial position.

Group	2014 Carrying value €’000	2014 Fair value €’000	2013 Carrying value €’000	2013 Fair value €’000
Financial assets
Cash and cash equivalents	1,158,692	1,158,692	3,453,236	3,453,236
Cash placed as collateral with the NTMA	690,000	690,000	802,000	802,000
Available for sale financial assets	-	-	145,138	145,138
Amounts due from Participating Institutions	84,810	84,810	78,447	78,447
Derivative financial instruments	58,241	58,241	160,369	160,369
Loans and receivables - NAMA	13,360,034	15,011,030	19,598,110	20,459,016
- NARL	-	-	11,715,589	11,715,589
Other assets	12,164	12,164	23,755	23,755
Investments in equity instruments	36,181	36,181	6,373	6,373
Total assets	15,400,122	17,051,118	35,983,017	36,843,923
Financial liabilities
Amounts due to Participating Institutions	20,428	20,428	24,676	24,676
Derivative financial instruments	595,528	595,528	599,784	599,784
Senior debt securities in issue	13,590,000	13,582,294	34,618,000	34,579,669
Other liabilities	126,114	126,114	172,594	172,594
Tax payable	1,769	1,769	407	407
Total liabilities	14,333,839	14,326,133	35,415,461	35,377,130

Agency	2014 Carrying value €’000	2014 Fair value €’000	2013 Carrying value €’000	2013 Fair value €’000
Financial assets
Cash and cash equivalents	101	101	1,152	1,152
Other assets	168,161	168,161	5,961	5,961
Investment in subsidiaries	49,000	49,000	49,000	49,000
Total assets	217,262	217,262	56,113	56,113
Financial liabilities
Interest bearing loans and borrowings	53,699	53,699	53,513	53,513
Other liabilities	3,892	3,892	7,178	7,178
Total liabilities	57,591	57,591	60,691	60,691

Financial assets not subsequently measured at fair value

For financial assets and liabilities which are not subsequently measured at fair value in the statement of financial position, the methods and assumptions used to calculate the fair value of these assets and liabilities are set out below.

(i) Cash and balances with banks

The fair value of floating rate placements and term deposits is their carrying amount. The estimated fair value of fixed interest bearing deposits is equal to their carrying value at the period end as deposits are short term and the effect of discounting is minimal.

(ii) Amounts due from Participating Institutions

The estimated fair value of amounts due from Participating Institutions is equal to their carrying value at the period end as receivables are current and will be settled in cash.

(iii) Loans and receivables

Loans and receivables are shown net of charges for impairment. The fair value of loans and receivables has been estimated using the expected future cash flows in the portfolio. Expected future cash flows for individually significant debtors were reviewed as part of the impairment cash flow assessment at the reporting date. During 2014, the Board agreed a target minimum debt redemption strategy of 80% by end 2016, therefore the majority of future cash flows are expected to occur in the years 2015 and 2016. Future cash flows are discounted at a rate ranging from 4.57% to 5.04%, which is a rate considered appropriate by management, taking into consideration the time value of money and the risks involved. The fair value of loans and receivables reported in 2013 was calculated using a similar method, whereby cash flows that that were expected to occur in the years 2014-2016 were discounted at a rate of 5.5%. However cash flows that were expected to occur in 2017 and 2020 were discounted at a higher rate of 10% due to greater uncertainty in predicting cash flows beyond 2016. The estimation of future cash flows in any year is subject to judgement by management in relation to the discount rate used and the timing and amount of future cash flows.

(iv) Debt securities in issue

The aggregate fair values are calculated based on a valuation model using similar quoted instruments and applying a current yield curve appropriate for the remaining term to maturity.

(b) Fair value hierarchy

IFRS 13 specifies a three level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. The fair value hierarchy comprises:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on recognised exchanges.


• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes OTC derivative contracts. The sources of input parameters use the standard LIBOR / EURIBOR yield curve.


• Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.

Fair value hierarchy for assets and liabilities measured at fair value

Group 31 December 2014	Level 1 €’000	Level 2 €’000	Level 3 €’000	Total €’000
Assets
Derivative financial instruments	-	56,714	-	56,714
Foreign currency derivatives	-	1,527	-	1,527
Investments in equity instruments	-	36,181	-	36,181
Total assets	-	94,422	-	94,422
Liabilities	-		-
Derivative financial instruments	-	403,507	-	403,507
Foreign currency derivatives	-	192,021	-	192,021
Total liabilities	-	595,528	-	595,528

Group 31 December 2013	Level 1 €’000	Level 2 €’000	Level 3 €’000	Total €’000
Assets
Derivative financial instruments	-	142,207	-	142,207
Foreign currency derivatives	-	18,162	-	18,162
Available for sale financial assets	-	145,138	-	145,138
Investments in equity instruments	-	6,373	-	6,373
Total assets	-	311,880	-	311,880
Liabilities
Derivative financial instruments	-	495,622	-	495,622
Foreign currency derivatives	-	104,162	-	104,162
Total liabilities	-	599,784	-	599,784

None of the assets and liabilities of the Agency are carried at fair value.

Categories of financial assets and financial liabilities

Financial assets and liabilities are categorised in accordance with IAS 39 as follows:

• Loans and receivables


• Financial assets or liabilities at fair value through profit or loss – held for trading (FVTPL)


• Available for sale financial assets (AFS)


• Financial liabilities measured at amortised cost

Financial assets Group 31 December 2014	Loans and receivables €’000	FVTPL €’000
Cash and cash equivalents	1,158,692	-
Cash placed as collateral with the NTMA	690,000	-
Amounts due from Participating Institutions	84,810	-
Derivative financial instruments	-	58,241
Loans and receivables	13,360,034	-
Investments in equity instruments	-	36,181
Other assets	12,164	-

Financial liabilities Group 31 December 2014	Financial liabilities measured at amortised cost €’000	FVTPL €’000
Amounts due to Participating Institutions	20,428	-
Derivative financial instruments	-	595,528
Senior debt securities in issue	13,590,000	-
Other liabilities	126,114	-

No held to maturity investments were held by the Group at the reporting date.