130 JUST GROUP PLC Annual Report and Accounts 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
16 FINANCIAL INVESTMENTS All of the Group’s financial investments are measured at fair value through the profit or loss, and are either designated as such on initial recognition or, in the case of derivative financial assets, classified as held for trading. Fair value Cost 2020 £m 2019 £m 2020 £m 2019 £m Units in liquidity funds 1,128.5 1,384.0 1,128.5 1,384.0 Investment funds 176.1 137.3 175.2 137.2 Debt securities and other fixed income securities 11,061.4 10,387.8 10,001.9 9,696.8 Deposits with credit institutions 99.7 104.6 99.7 104.6 Derivative financial assets 800.0 237.0 – – Loans secured by residential mortgages 8,261.1 7,980.5 4,535.7 4,778.3 Loans secured by commercial mortgages 707.0 494.5 680.1 477.8 Other loans 1,036.0 880.3 885.5 795.0 Total 23,269.8 21,606.0 17,506.6 17,373.7
The majority of investments included in debt securities and other fixed income securities are listed investments.
Units in liquidity funds comprise wholly of units in funds which invest in cash and cash equivalents.
Deposits with credit institutions with a carrying value of £97.8m (2019: £103.1m) have been pledged as collateral in respect of the Group’s derivative financial instruments. Amounts pledged as collateral are deposited with the derivative counterparty.
17 FAIR VALUE (a) Determination of fair value and fair value hierarchy All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a whole. In determining the assessment of the fair value hierarchy at 31 December 2020, the impact of COVID-19 on market activity and on the availability of actively quoted prices has been taken into consideration, since a lack of availability of quoted prices or other observable market data might necessitate a transfer of assets from Level 1 to Level 2, or from Level 2 to Level 3. Although market disruption was experienced at the end of the first quarter and the beginning of the second quarter of 2020 as a result of the development of the COVID-19 pandemic in the UK and globally, there has subsequently been a return to pre-COVID-19 levels of market activity and therefore we have maintained valuation methodologies. There have been no changes to hierarchy levels at 31 December 2020 as a result of considering the impacts from COVID-19. All Level 1 and 2 assets continue to have pricing available from actively quoted prices and observable market data. Level 1 Inputs to Level 1 fair values are unadjusted quoted prices in active markets for identical assets and liabilities that the entity can access at the measurement date. Level 2 Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the instrument. Level 2 inputs include the following: • quoted prices for similar assets and liabilities in active markets; • quoted prices for identical assets or similar assets in markets that are not active, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which very little information is released publicly; • inputs other than quoted prices that are observable for the asset or liability; and • market-corroborated inputs. Where the Group uses broker/asset manager quotes and no information as to observability of inputs is provided by the broker/asset manager, the investments are classified as follows: • where the broker/asset manager price is validated by using internal models with market-observable inputs and the values are similar, the investment is classified as Level 2; and • in circumstances where internal models are not used to validate broker/asset manager prices, or the observability of inputs used by brokers/asset managers is unavailable, the investment is classified as Level 3. The majority of the Group’s debt securities held at fair value and financial derivatives are valued using independent pricing services or third party broker quotes, and therefore classified as Level 2. Level 3 Inputs to Level 3 fair values are unobservable inputs for the asset or liability. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability. Unobservable inputs reflect the same assumptions as those that the market participant would use in pricing the asset or liability.
Powered by FlippingBook