Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 146 The United Laboratories International Holdings Limited Annual Report 2020 40. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis (Continued) Except as detailed in the following table, the directors of the Company consider that the carrying amounts of financial assets and financial liabilities measured at amortised cost in the consolidated financial statements approximate their fair values. Such fair values have been determined in accordance with generally accepted pricing models based on discounted cash flow analysis. 31 December 2019 Carrying Fair Fair value amount value hierarchy RMB’000 RMB’000 RMB’000 Financial liabilities Corporate Bonds (included in borrowings) – fixed rate 1,095,418,000 1,100,000,000 Level 1 Fair value measurements and valuation processes In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. For the embedded derivative component of the Convertible Bonds and unlisted equity investment, the third party qualified valuers were engaged by the Group to perform the valuation. The Group works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model. The external valuers’ findings are reported to the board of directors of the Company semi- annually to explain the cause of fluctuations in the fair value of the assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed above. 41. FINANCIAL ASSETS AND FINANCIAL LIABILITIES SUBJECT TO OFFSETTING, ENFORCEABLE MASTER NETTING ARRANGEMENTS AND SIMILAR AGREEMENTS The Group has entered certain derivative transactions that are covered by the International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) signed with various banks. These derivative instruments are not offset in the consolidated statement of financial position as the ISDA Agreements are in place with a right of set off only in the event of default, insolvency or bankruptcy so that the Group currently has no legally enforceable right to set off the recognised amounts. No further disclosure on the netting arrangement is presented as the financial impact is insignificant.