SIGA_Annual_Report_2015 - page 65

Fair value of financial instruments
Fair values approximate amounts at which financial instruments could be exchanged between willing parties based on current markets for
instruments with similar characteristics such as risk and remaining maturities. Fair values are determined, where possible, by reference
to quoted bid or asking prices in an active market. In the absence of an active market, SIGA determines fair value based on internal or
external valuation models, such as discounted cash flow analysis or using observable market based inputs (bid and ask price) for instruments
with similar characteristics and risk profiles. SIGA’s own credit risk and the credit risk of the counterparty have been taken into account in
determining the fair value of financial assets and liabilities, including derivative instruments. Fair value measurements are subjective in nature,
and represent point-in-time estimates which may not reflect fair value in the future.
SIGA classifies fair value measurements recognized in the statement of financial position using a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
Level 1 – valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value measurements are classified in the fair value hierarchy based on the lowest level input that is significant to that fair value
measurement. This assessment requires judgment, considering factors specific to an asset or a liability and may affect placement within .
the fair value hierarchy. See Note 20 for further discussion on the classification and fair value of financial instruments.
Impairment of financial assets (including receivables)
A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it is impaired.
A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount
and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in
profit or loss in the statement of comprehensive income and reflected in an allowance account against receivables. Interest on the impaired
asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss
to decrease, the decrease in impairment loss is reversed through profit or loss in the statement of comprehensive income. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined
if no impairment loss had been recognized.
Finance costs comprise interest expense on borrowings not subject to capitalization, amortization of costs related to borrowings, interest on
finance leases, and impairment losses recognized on financial assets.
The International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) have
issued the following standards and interpretations to existing standards that were effective and applied:
Amendments to IAS 32,
Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 36,
Recoverable Amount Disclosures for Non-Financial Assets
Amendments to IAS 39,
Financial Instruments: Recognition and Measurement
The adoption of these new and revised standards did not have a significant effect on these financial statements.
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