National Asset Management Agency - Annual Report 2013
(a) Comparison of carrying value to fair value

The table below summarises the carrying amounts and fair values of financial assets and liabilities presented on the Group and Agency's statement of financial position.



Group
2013
Carrying value
€'000
2013
Fair value
€'000
2012
Carrying value
€'000
2012
Fair value
€'000
Financial assets
Cash and cash equivalents 3,453,236 3,453,236 2,235,822 2,235,822
Cash placed as collateral with the NTMA 802,000 802,000 1,150,000 1,150,000
Available for sale financial assets 145,138 145,138 257,932 257,932
Amounts due from Participating Institutions 78,447 78,447 78,953 78,953
Derivative financial instruments 160,369 160,369 350,706 350,706
Loans and receivables - NAMA 19,598,110 20,459,016 22,776,262 21,794,746
Loans and receivables - NARL 11,715,589 11,715,589 - -
Other assets 23,755 23,755 33,490 33,490
Investments in equity instruments 6,373 6,373 - -
Total assets 35,983,017 36,843,923 26,883,165 25,901,649

Financial liabilities
Amounts due to Participating Institutions 24,676 24,676 36,423 36,423
Derivative financial instruments – NAMA 591,581 591,581 1,168,688 1,168,688
Derivative financial instruments – NARL 8,203 8,203 - -
Senior debt securities in issue 34,618,000 34,579,669 25,440,000 25,389,120
Other liabilities 172,594 172,594 169,557 169,557
Tax payable 407 407 1,627 1,627
Total liabilities 35,415,461 35,377,130 26,816,295 26,765,415


Agency
2013
Carrying value
€'000
2013
Fair value
€'000
2012
Carrying value
€'000
2012
Fair value
€'000
Financial assets
Cash and cash equivalents 1,152 1,152 1,268 1,268
Other assets 5,961 5,961 9,306 9,306
Investment in subsidiaries 49,000 49,000 49,000 49,000
Total assets 56,113 56,113 59,574 59,574

Financial liabilities
Interest bearing loans and borrowings 53,513 53,513 53,320 53,320
Other liabilities 7,178 7,178 10,027 10,027
Total liabilities 60,691 60,691 63,347 63,347
Financial assets not subsequently measured at fair value

For financial assets and liabilities which are not subsequently measured at fair value in the statement of financial position, the methods and assumptions used to calculate the fair value of these assets and liabilities are set out below.

(i) Cash and balances with banks

The fair value of floating rate placements and term deposits is their carrying amount. The estimated fair value of fixed interest bearing deposits is equal to their carrying value at the period end as deposits are short term and the effect of discounting is minimal.

(ii) Amounts due from Participating Institutions

The estimated fair value of amounts due from Participating Institutions is equal to their carrying value at the period end as receivables are current and will be settled in cash.

(iii) Loans and receivables

Loans and receivables are shown net of charges for impairment. The fair value of loans and receivables has been estimated using the expected future cash flows in the portfolio. Expected future cash flows for individually significant debtors were reviewed as part of the impairment cash flow assessment at the reporting date. Cash flows between 2014 and 2016 were discounted at a rate of 5.5% and cash flows between 2017 and 2020 were discounted at a higher rate of 10% due to greater uncertainty in predicting cash flows beyond 2016. This estimation is subject to judgement by management in relation to the discount rate used and the timing and amount of future cash flows.

(iv) Debt securities in issue

The aggregate fair values are calculated based on a valuation model using similar quoted instruments and applying a current yield curve appropriate for the remaining term to maturity.

(b) Fair value hierarchy

IFRS 13 specifies a three level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group's market assumptions. The fair value hierarchy comprises:

  • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on recognised exchanges.
  • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes OTC derivative contracts. The sources of input parameters use the standard LIBOR yield curve.
  • Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.

Fair value hierarchy for assets and liabilities measured at fair value

Group
31 December 2013
Level 1
€'000
Level 2
€'000
Level 3
€'000
Total
€'000
Assets
Derivative financial instruments - 142,207 - 142,207
Foreign currency derivatives - 18,162 - 18,162
Available for sale financial assets - 145,138 - 145,138
Investments in equity instruments - 6,373 - 6,373
Total assets - 311,880 - 311,880

Liabilities
Derivative financial instruments - 495,622 - 495,622
Foreign currency derivatives - 104,162 - 104,162
Total liabilities - 599,784 - 599,784
Group
31 December 2012
Level 1
€'000
Level 2
€'000
Level 3
€'000
Total
€'000
Assets
Derivative financial instruments - 338,956 - 338,956
Foreign currency derivatives - 11,750 - 11,750
Available for sale financial assets - 257,932 - 257,932
Total assets - 608,638 - 608,638

Liabilities
Derivative financial instruments - 862,732 - 862,732
Foreign currency derivatives - 305,956 - 305,956
Total liabilities - 1,168,688 - 1,168,688

None of the assets and liabilities of the Agency are carried at fair value.

Categories of financial assets and financial liabilities

Financial assets and liabilities are categorised in accordance with IAS 39 as follows;

  • Loans and receivables
  • Financial assets or liabilities at fair value through profit or loss – held for trading (FVTPL)
  • Available for sale financial assets (AFS)
  • Financial liabilities measured at amortised cost

Financial assets
Group
31 December 2013
Loans and
receivables
€'000

FVTPL
€'000

AFS
€'000
Cash and cash equivalents 3,453,236 - -
Cash placed as collateral with the NTMA 802,000 - -
Financial assets available for sale - - 145,138
Amounts due from Participating Institutions 78,447 - -
Derivative financial instruments - 160,369 -
Loans and receivables 31,313,699 - -
Investments in equity instruments - 6,373 -
Other assets 23,755 - -


Financial liabilities
Group
31 December 2013
Financial
liabilities
measured at
amortised cost
€'000



AFS
€'000
Amounts due to Participating Institutions 24,676 -
Derivative financial instruments - 599,784
Senior debt securities in issue 34,618,000 -
Other liabilities 172,594 -

No held to maturity investments were held by the Group at the reporting date.