Fair value measurement
The following table shows the volumes of assets and liabilities that were measured at fair value on a recurring basis as of the end of the reporting period and the levels of the fair value hierarchy into which the inputs used in valuation techniques were categorized.
|Assets and Liabilities Measured at Fair Value|
|March 31, 2014|
|€ million||Level 1||Level 2||Level 3|
|Investments in other affiliated companies||5||–||–|
|Non-current derivative assets||–||13||–|
|Other non-current financial assets||–||1||–|
|Current derivative assets||–||39||–|
|Other current financial assets||0||–||–|
|Non-current derivative liabilities||–||(6)||–|
|Current derivative liabilities||–||(19)||–|
According to the fair value measurement hierarchy, quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date are given the highest priority (Level 1). Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, are assigned to Level 2. Unobservable inputs for the asset or liability are given the lowest priority (Level 3).
The investments in other affiliated companies measured at fair value pertain to shares in the listed companies Gevo Inc., Englewood, United States, and BioAmber Inc., Minneapolis, United States. The item “Investments in other affiliated companies” in the statement of financial position also includes €9 million in non-listed equity instruments whose fair values at the end of the reporting period could not be reliably measured and which are therefore recognized at cost. There are currently no plans to dispose of these investments.
Most of the derivative financial instruments used by LANXESS are traded in an active, liquid market. The fair values as of the end of the reporting period pertain exclusively to forward exchange contracts and are derived from their trading or listed prices using the “forward method.” Where no market price is available, values are determined using recognized capital market pricing methods based on observable market data. In determining the fair values, adjustments for LANXESS’s own credit risk and counterparty credit risk are made on the basis of the respective net positions.
The near-cash assets include units of money market funds that can be sold at any time and are expected to be realized within twelve months after the end of the reporting period.
In the case of financial instruments accounted for using valuation principles other than fair value measurement, the fair value – where this can be reliably determined – is normally the carrying amount. Only the carrying amount of the bonds, at €1,947 million, differed significantly from their fair value, which was €2,057 million as of March 31, 2014.
Additional information about the measurement of fair value and about financial instruments is provided in the notes to the consolidated financial statements as of December 31, 2013.