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Rothschild & Co | Annual Report 2017
3 Fair value Level 3 disclosures
Valuation technique by class of Level 3 financial assets
Description
Fair value
at 31/12/2017
(in millions of euro)
Valuation
technique
Unobservable
input
Range (weighted
average)
Securities portfolios
(CDOs, CLOs, etc.)
1.9
Discounted cash flow, based on
expected cash flows of securitised
assets and expectation of how
these will be distributed to
different noteholders
Default and recovery data
according to the various asset
classes
n/a
Mezzanine debt securities
1.5
Carrying value based on original
investment plus accrued interest
less any impairment provisions
Expected repayment cash flow,
taking into account
shareholders’ equity of the
borrower
n/a
AFS debt
3.4
Funds and other equity
32.4
External valuation
n/a
n/a
1.0
Valued at cost
n/a
n/a
AFS equity
33.4
Sensitivity of fair value for Level 3 instruments
Out of €33.4 million of AFS equity securities classified in Level 3 as of 31 December 2017, €32.4 million were subject to a third-party valuation. To quantify
the fair value sensitivity of these instruments, measured using unobservable inputs, the Group has determined the impact on net income and on equity in
the event of a fall of 5% in the carrying value. In such an event, there would be a post-tax charge to the income statement of €0.1 million and a charge to
equity of €1.5 million.
Movement in Level 3 assets
The following table presents the movement in assets valued using Level 3 valuation methods in the period:
In millions of euro
Bonds and
other fixed
income
securities
Funds and
other
equities
TOTAL
As at 1 April 2017
3.5
67.1
70.6
Total gains or losses for the period
Included in income statement
–
(0.4)
(0.4)
Gains/(losses) through equity
–
5.8
5.8
Purchases, issues, sales and settlements
Additions
–
1.5
1.5
Disposals
(0.5)
(40.4)
(40.9)
Exchange
0.4
(0.2)
0.2
AS AT THE END OF THE PERIOD
3.4
33.4
36.8
Notes to the consolidated financial statements