Note 23 - Fair value of financial instruments

Financial instruments measured at fair value
Financial instruments that are booked at fair value comprise shares, parts of the money market certificate and bond portfolio (classified at fair value), derivatives, and debt included in hedge accounting. For further details, note 2 IFRS Accounting principles, and note 4 Critical estimates and assessments concerning the use of accounting principles.

Financial instruments measured at amortised cost
Financial instruments that are not measured at fair value are recognised at amortised cost. For further details, see note 2 IFRS Accounting principles. Amortised cost entails valuing balance sheet items after initially agreed cash flows, adjusted for impairment.

Measurement at fair value will invariably be encumbered with uncertainty.

Measurement at fair value for items carried at amortised cost
Methods underlying the determination of fair value of financial instruments that are measured at amortised cost are described below:

Loans to and claims on customers
Current-rate loans are exposed to competition in the market, indicating that possible excess value in the portfolio will not be maintained over a long period. Fair value of current-rate loans is therefore set to amortised cost. The effect  of changes in credit quality in the portfolio is accounted for through collectively assessed impairment write-downs, therefore giving a good expression of fair value in that part of the portfolio where individual write-down assessments have not been made.

Individual write-downs are determined through an assessment of future cash flow, discounted by effective interest rate. Hence the discounted value gives a good expression of the fair value of these loans.

Fixed interest loan in NOK are already valued at fair value in the accounts, and are not included in the estimates described above.

Bonds held to maturity and bonds for lending and claim purpose
Change to fair value is calculated by reference to a theoretical valuation of market value based on interest rate and spread curves.

Loans to and claims on credit insitutions and Debt to credit institutions
For loans to and claims on credit institutions, as well as debt to credit institutions, fair value is estimated as equal to book value.

Securities debt and subordinated debt
Securities debt and subordinated debt are valued against valuation of market value based on interest rate and spread curves.

Parent bank                
  Book value Fair value   Book value Fair value   Book value Fair value
(NOK million) 31.12.11 31.12.11   31.12.10 31.12.10   31.12.09 31.12.09
Assets                
Loans to and claims on credit institutions   5,033   5,033   2,894 2,894     2,477 2,477
Loans to and claims on customers at amortised cost   68,357 68,357   65,138 65,138     56,925 56,925
Loans to and claims on customers at fair value   2,012   2,012   1,845 1,845     1,912 1,912
Shares   546 546   625 625     563 563
Bonds at fair value   9,875   9,875   11,958 11,958     8,858 8,858
Bonds held to maturity   583 584   1,562 1,570     2,409 2,426
Bonds for lending and claim purpose   2,460   2,451   3,516 3,511     3,484 3,497
Derivatives   3,698   3,698   1,825 1,825     1,150 1,150
Total financial assets 92,564 92,557   89,363 89,366   77,779 77,808
                 
Liabilities                
Debt to credit institutions 6,232   6,232   8,743 8,743     6,992 6,992
Debt related to "swap" arrangement with the government 2,886   2,886   4,318 4,318     4,318 4,318
Deposits from and debt to customers 48,114 48,114   43,028 43,028     37,382 37,382
Securities debt at amortised cost 12,444 11,266   11,001 10,966     7,663 7,735
Securities debt at fair value 15,704 15,704   16,940 16,940     15,695 15,695
Derivatives 3,158   3,158   1,684 1,684     712 712
Subordinated debt at amortised cost 936 884   1,081 1,045     2,676 2,623
Subordinated debt at fair value 1,754   1,754   1,677 1,677     1,200 1,200
Total financial liabilities 91,228 89,998   88,473 88,401   76,637 76,657
                 
                 
Group                
  Book value Fair value   Book value Fair value   Book value Fair value
(NOK million) 31.12.11 31.12.11   31.12.10 31.12.10   31.12.09 31.12.09
Assets                
Loans to and claims on credit institutions   2,557   2,557   420 420     153 153
Loans to and claims on customers at amortised cost   71,363 71,363   67,491 67,491     59,362 59,362
Loans to and claims on customers at fair value   1,281   1,281   1,845 1,845     1,912 1,912
Shares   611 611   618 618     505 505
Bonds at fair value   9,875   9,875   11,958 11,958     8,858 8,858
Bonds held to maturity   583 584   1,562 1,570     2,409 2,426
Bonds for lending and claim purpose   2,460   2,451   3,460 3,454     3,460 3,474
Derivatives   3,697   3,697   1,825 1,825     1,149 1,149
Total financial assets 92,426 92,419   89,178 89,179   77,809 77,840
                 
Liabilities                
Debt to credit institutions 6,232   6,232   8,743 8,743     6,992 6,992
Debt related to "swap" arrangement with the government 2,886   2,886   4,318 4,318     4,318 4,318
Deposits from and debt to customers 47,871 47,871   42,786 42,786     37,227 37,227
Securities debt at amortised cost 12,444 11,266   11,001 10,966     7,663 7,735
Securities debt at fair value 15,704 15,704   16,940 16,940     15,695 15,695
Derivatives 3,158   3,158   1,684 1,684     712 712
Subordinated debt at amortised cost 936 884   1,081 1,045     2,676 2,623
Subordinated debt at fair value 1,754   1,754   1,677 1,677     1,200 1,200
Total financial liabilities 90,985 89,755   88,230 88,159   76,483 76,503

Annual report and notes

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