If the method of measurement of assets or liabilities changes because of e.g. losing (or obtaining) access to quotations observed on an active market, such assets or liabilities are reclassified between levels I and II.
Assets or liabilities are reclassified between Levels II and III (or accordingly between Levels III and II) when:
- there is a change in the measurement model resulting from the application of new unobservable factors (or accordingly observable ones); or
- previously used factors that had a significant impact on the measurement are no longer observable (or accordingly become observable) on the active market.
Reclassifications between different levels of the fair value hierarchy are effected on the date ending each quarter according to the value as at that date.
In 2022, the following transfers of assets between fair value levels were made:
- corporate, municipal bonds, which were measured using market price information for comparable financial instruments, as well as corporate, municipal and Treasury bonds and foreign exchange and interest rate derivatives, for which the impact of estimated credit parameters did not significantly affect the valuation, and capital market derivatives, for which the estimated volatility did not significantly affect the valuation, were reclassified from Level III to Level II;
- reclassification from Level II to Level III was applied to corporate and municipal bonds for which the impact exerted by the estimated credit parameters on the measurement was significant and capital market derivatives for which estimated volatility exerted a significant impact on the measurement;
- reclassification from Level II to Level I was applied to government bonds measured using market quotations was discontinued due to an increase in market activity.
In 2021, the following transfers of assets between fair value levels were made:
- reclassification from Level III to Level II was applied to corporate bonds measured using market information about the prices of comparable financial instruments, corporate and municipal bonds for which the estimated credit parameters had no significant impact on their measurement and capital market derivatives for which the estimated correlation had no significant impact on their measurement;
- reclassification from Level II to Level III was applied to corporate and municipal bonds for which the impact exerted by the estimated credit parameters was material and capital market derivatives for which the estimated volatility exerted a significant impact on the measurement;
- reclassification from Level I to Level II was applied to government bonds measured using information on the prices of comparable financial instruments and participation units in mutual funds for which measurement based on market quotations was discontinued due to a decline in market activity.