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Financial Instruments (continued)

Derivative financial instruments

SIGA uses interest rate swap derivatives to manage its exposure to interest rate risk. Derivatives are initially recognized at fair

value at the date that the derivative contract is entered into and subsequently measured at fair value with changes in fair value

recognized through comprehensive income immediately.

Embedded derivatives

Derivatives may be embedded in other host instruments and are treated as separate derivatives when their economic

characteristics and risks are not clearly and closely related to those of the host instrument, when the embedded derivative has

the same terms as those of a stand-alone derivative, and the combined contract is not held-for-trading or designated at fair

value. These embedded derivatives are measured at fair value with subsequent changes recognized in the statement of

comprehensive income.

As at March 31, 2016, SIGA had no contracts (March 31, 2015 – none) with embedded derivatives that are required to be

valued separately.

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.


Year Ended March 31, 2016