Annual Report 2019

Central Bank of the Republic of Armenia 29. Fair value of financial instruments (continued) (b) Notes to the 2019 consolidated financial statements Valuation processes for recurring level 3 fair value measurements Level 3 valuations are periodically reviewed by the Accounting and Finance Departments of the Bank with making decision in respect of the appropriateness of the valuation technique which is used and analysis of the valuation model inputs. The level three instruments are valued at the net present value of estimated future cash flows using discount factors determined based on the characteristics of each individual financial instrument. When appropriate, the back testing is performed by the Group. (၁) Assets and liabilities not measured at fair value but for which fair value is disclosed Fair values analysed by level in the fair value hierarchy and carrying value of financial assets not measured at fair value are as follows: In thousands of Armenian Drams Level 2 Level 3 31 December 2019 Carrying value Level 2 Level 3 31 December 2018 Carrying value Financial assets Placements with banks and other financial institutions in foreign currency Nostro accounts Term deposits 534,601,773 25,490,105 Cash included in assets under trust management Margin requirements of interest rate futures 2,015 Placements and investments with banks and other financial institutions in domestic currency 534,601,093 25,388,880 310,841,888 31,604,817 5,689,324 2,015 56,931 310,841,261 31,479,341 5,689,324 56,931 Repurchase agreements and other overnight facilities 126,669,774 126,669,774 163,433,113 163,433,113 Loans to resident financial institutions under arrangement with the KfW, the World Bank, Asian Development Bank and European Investment Bank 126,172,483 125,805,219 126,846,911 125,409,306 Mortgage refinancing 91,827,494 90,352,136 73,037,990 76,542,692 Deposits and current accounts placed in commercial banks 63,899,322 63,580,371 50,778,773 50,708,941 Other loans and investments 3,277,650 22,882,147 971,940,616 22,882,147 27,475,368 3,374,976 21,550,404 27,554,109 993,874,856 765,664,723 21,550,404 791,715,018 Total The management believes that the carrying amount of deposits and accounts of financial and other institutions in foreign currency and in domestic currency, amounts due to the IMF and other borrowed funds approximates their fair value. The fair value hierarchy for these financial liabilities is Level 2. Fair values analysed by level in the fair value hierarchy and carrying value of the remaining financial liabilities not measured at fair value are as follows: In thousands of Armenian Drams Financial liabilities Due to the Government of the Republic of Armenia 31 December 2019 Level 2 Carrying value Level 2 31 December 2018 Carrying value Foreign currency liabilities Current accounts of the Government 1,248,593 1,248,593 5,822,025 5,822,025 Domestic currency liabilities Current accounts of the Government 41,045,292 Term deposits 285,098,705 41,045,292 285,000,475 49,117,388 135,463,400 49,117,388 135,487,725 Loans from the Government 321,865 321,865 Debt securities issued Total 6,756,066 334,148,656 6,626,428 333,920,788 8,006,693 7,838,688 198,731,371 198,587,691 The fair values in level 2 and level 3 of fair value hierarchy were estimated using the discounted cash flows valuation technique. The fair value of floating rate instruments that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity. 41

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