Annual Report 2020

China Merchants China Direct Investments Limited Annual Report 2020 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the year ended 31 December 2020 4. KEY SOURCE OF ESTIMATION UNCERTAINTY The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year are as follows: Fair value of financial assets at FVTPL and financial liabilities designated at FVTPL As indicated in notes 5, 15 and 20, the Group selects appropriate valuation techniques for financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. The fair values of unlisted financial assets at FVTPL and financial liabilities designated at FVTPL are determined in accordance with generally accepted pricing models. To the extent practical, models use only observable data. However, areas such as credit risk of the Group and counterparties, volatilities of relevant underlying securities and liquidity and marketability discount require management to make estimates. Whilst the Group considers these valuations are the best estimates, the ongoing COVID-19 pandemic has resulted in greater market volatility and may cause further disruptions to the investees’/issuers’ businesses, which have led to higher degree of uncertainties in respect of the valuations in the current year. Changes in assumptions about these factors could affect the estimated fair value of financial instruments. The values assigned to the financial assets and liabilities are based upon available information and professional judgment. They do not necessarily represent amounts which might ultimately be realised, since such amounts depend on future circumstance and cannot be reasonably determined until the individual position is realised. 5. FINANCIAL INSTRUMENTS Categories of financial instruments 2020 2019 US$ US$ Financial assets At FVTPL 909,272,978 728,881,441 Amortised cost 62,346,606 65,132,027 Financial liabilities Amortised cost 17,611,245 7,398,800 Designated at FVTPL 1,461,857 1,190,048