CSL Ltd Annual Report 2021

Floating interest rates represent the most recently determined rate applicable to the instrument at balance sheet date. All interest rates on floating rate financial assets and liabilities are subject to reset within the next six months. Fair value of financial assets and financial liabilities The carrying value of financial assets and liabilities is materially the same as the fair value. The following methods and assumptions were used to determine the net fair values of financial assets and liabilities. Cash The carrying value of cash equals fair value, due to the liquid nature of cash. Trade and other receivables/payables The carrying value of trade and other receivables/payables with a remaining life of less than one year is deemed to be equal to its fair value. Interest bearing liabilities Fair value is calculated based on the discounted expected principal and interest cash flows, using rates currently available for debt of similar terms, credit risk and remaining maturities. The Group also has foreign currency loans payable that have been designated as a cash flow hedge against forecast sale transactions in foreign currency. An effective hedge is one that meets certain criteria. Gains or losses on the cash flow hedge that relate to the effective portion of the hedge are recognised in equity. Gains or losses relating to the ineffective portion, if any, are recognised in the consolidated statement of comprehensive income. Valuation of financial instruments For financial instruments measured and carried at fair value, the Group uses the following to categorise the method used: • Level 1: Items traded with quoted prices in active markets for identical liabilities • Level 2: Items with significantly observable inputs other than quoted prices in active markets • Level 3: Items with unobservable inputs (not based on observable market data) There were no derivatives outstanding as of 30 June 2021 (30 June 2020 – nil). There were no transfers between Level 1 and 2 during the year. The contingent consideration liabilities associated with business combinations are measured at fair value (refer to Note 15b) which has been calculated with reference to our judgement of the expected probability and timing of the potential future milestone payments, based upon level 3 inputs under the fair value hierarchy, which is then discounted to a present value using appropriate discount rates with reference to the Group’s incremental borrowing rates. CSL Limited Annual Report 2020/21 132 Notes to the Financial Statements