Note 26 - Fair value of financial instruments at amortised cost

Financial instruments measured at amortised cost

Financial instruments that are not measured at fair value are recognised at amortised cost or are in a hedging relationship. For further details, see note 2 Accounting principles. Amortised cost entails valuing balance sheet items after initially agreed cash flows, adjusted for impairment. Amortised cost will not always be equal to the values that are in line with the market assessment of the same financial instruments. This is due to different perceptions of market conditions, risk and discount rates.

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 model-based 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.

Loans to and claims on credit institutions, Earned income not yet received, Accounts receivable, securities,  Debt to credit institutions, Deposits from and debt to customers and Debt from securities
For loans to and claims on credit institutions, as well as debt to credit institutions and deposits from customers, fair value is estimated equal to amortised cost.

Securities debt and subordinated debt
The calculation of fair value in level 2 is based on observable market values such as on interest rate and spread curves where available.

Parent Bank          
    31 Dec 2021 31 Dec 2020
(NOKm) Level 1) Book value Fair Value Book value Fair Value
Assets          
Loans to and claims on credit institutions 2 13,190 13,190 12,901 12,901
Loans to and claims on customers at amortised cost 2 48,434 48,525 45,169 45,260
Earned income not yet received 2 152 152 135 135
Accounts receivable, securities 2 20 20 11 11
Total financial assets at amortised cost   61,796 61,887 58,216 58,307
           
Liabilities          
Debt to credit institutions 2 14,340 14,340 14,629 14,629
Deposits from and debt to customers 2 112,028 112,028 98,166 98,166
Securities debt at amortised cost 2 8,871 8,870 8,619 8,619
Securities debt, hedging 2 31,461 31,460 33,301 33,300
Subordinated debt at amortised cost 2 1,753 1,752 1,752 1,752
Subordinated debt, hedging 2 -  -  -  - 
Lease liabilities 2 262 262 303 303
Debt from securities 2 157 157 13 13
Total financial liabilities at amortised cost   168,871 168,870 156,915 156,783
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Group          
    31 Dec 2021 31 Dec 2020
(NOKm) Level 1)   Book value Fair Value Book value Fair Value
Assets          
Loans to and claims on credit institutions 2 4,704 4,704 5,091 5,091
Loans to and claims on customers at amortised cost 2 58,637 58,744 54,086 54,193
Earned income not yet received 2 186 186 185 185
Accounts receivable, securities 2 300 300 678 678
Total financial assets at amortised cost   63,828 63,935 60,040 60,147
           
Liabilities          
Debt to credit institutions 2 15,063 15,063 15,094 15,094
Deposits from and debt to customers 2 111,286 111,286 97,529 97,529
Securities debt at amortised cost 2 8,871 8,870 8,619 8,619
Securities debt, hedging 2 31,461 31,460 33,301 33,300
Subordinated debt at amortised cost 2 1,796 1,796 1,795 1,795
Subordinated debt, hedging 2 -  -  -  - 
Lease liabilities 2 476 476 479 479
Debt from securities 2 351 351 568 568
Total financial liabilities at amortised cost   169,304 169,302 157,517 157,385
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1) Fair value is determined by using different methods in three levels. See note 25 for a definition of the levels

Financial results

Annual report and notes

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