Annual Report 2023

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2023 145 The United Laboratories International Holdings Limited Annual Report 2023 40. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable. • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities; • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. at prices) or indirectly (i.e. derived from prices); and • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Fair value at 31 December Fair value hierarchy Valuation technique(s) and key input(s) Significant unobservable inputs Relationship of unobservable inputs to fair value 2023 2022 RMB’000 RMB’000 Financial assets Financial asset at FVTPL – unquoted equity investment 500 500 Level 3 Method of comparables is used to evaluate the market value of the unquoted equity investments by using price to book ratio of listed entities in similar industries. – discount for lack of marketability of 32% (2022: 32%), determined by reference to recent market research. – A significant increase in the discount for lack of marketability would result in a significant decrease in the fair value. Foreign currency forward contracts classified as financial instruments accounted for as FVTPL in the consolidated statement of financial position Liabilities (44,778) Liabilities (10,087) Assets 1,841 Level 2 Discounted cash flow Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contracted forward rates, discounted at a rate that reflects the credit risk of various counterparties. N/A N/A There is no transfer between the different levels of the fair value hierarchy for both years.